Sterling slightly down on Friday after rough week

Sterling weakened by 0.17 cents (0.15%) against the euro on Friday to close the day at 1.1631.

• The UK trade deficit narrowed to a three-year low in May with a goods deficit of £6.3bn which will provide some underlying support for sterling, although the impact was limited.
  
• As expected, the Bank of England left interest rates on hold at 0.50% following the latest MPC policy meeting. The central bank also announced that their quantitative easing programme would remain at £125bn, contrary to some speculation that the amount of bond buying would be increased and this provided an immediate boost to sterling last week.
  
• The bank announced that there would be a review at the August meeting when the latest inflation report will be available. There will continue to be some expectation the bank will increase the bond buying next month and this will tend to prevent any substantial improvement in sentiment.
  
• The ECB stated last month commercial banks in the 16-nation euro region may lose a further $283 billion by the end of next year as the financial crisis forces them to write off bad loans.
  
• It is anticipated that European Central Bank President Jean-Claude Trichet will today state that interest rates will not be cut at the ECB’s next meeting.
  
• The ECB said in its monthly report last week that interest rates are “appropriate” and the eurozone’s economy will gradually get out of the recession in 2010. The region’s interest rate remained unchanged at 1% on July 2 in order to improve economic growth in the eurozone.