Now what?

- Will the upbeat mood provide an economic boost?
- The governor is not convinced

Writing in the Mail on Sunday, Sir Mervyn King pondered the possible economic legacy of the Olympic games; "By spreading happiness and good cheer the Games have made us all feel better. And, who knows, the impact on confidence may give the economy a boost. But ultimately the Games cannot alter the underlying economic situation we face." Earlier in the piece he had said; "Success does not come overnight. That is as true of our economy as it is of sport."

Is he being too pessimistic? Perhaps, although he did concede that "our economy... is slowly healing." The governor also mentioned that "the squeeze on real take-home pay is coming to an end" and producer price index figures released on Friday told a similar story about business margins. Input prices - manufacturers' costs - fell by -2.4% in the year to July while output - factory gate - prices were up by 1.7%.

The news had little impact on sterling but later in the day the pound did bounce from Wednesday's low against the US dollar. There were no data or news to provoke the one-cent rally, which looked very much like the result of investors covering short sterling and euro positions ahead of the weekend. Sterling starts this morning half a US cent above Friday's opening level while euro/dollar is a dozen ticks lower. As a result, the pound has added half a cent against the euro and is a touch higher against the yen. Sterling has firmed against most other currencies too; its only failures are against the antipodean dollars and the South African rand, where it is unchanged.

The Canadian dollar suffered a momentary wobble when the jobs data showed unemployment ticking up to 7.3% in July as 30.4k jobs disappeared. Investors had been expecting far more positive numbers. The announcement would have done more damage to the Loonie had it not been that most of the job losses were part-time ones.

Another set of data which failed to bite came from Japan this morning. Japanese gross domestic product grew by a provisional 0.3% in the second quarter, half what analysts had predicted. Growth of 1.4% in the year to June also fell well short of the 2.4% they had been expecting. However, the yen did not budge an inch.

With Germany's wholesale price index already out of the way (up by 0.3% in July and by 2.0% on the year) almost nothing remains on today's ecostat agenda.  Euroland's current account deficit for June is due as London opens and Greece may or may not publish the litany of woe that is second quarter economic shrinkage. And that's it until tonight, when New Zealand reports on retail sales, Australia releases the latest business confidence figures and the RICS reveals how quickly UK house prices are falling.

There is not much there to help or hinder sterling. But consider something else the governor said in his article; "the problems of the euro area continue with no obvious end in sight".