No UK rate cut in the offing

- Could be "counterproductive" says governor
- UK, US, Canadian trade figures today

It isn't just the Australian media that are unhappy with Britain's relative success at the great London sporting event. The Independent reports that the French cycling team's performance director "had 'a lot of questions' about Team GB, and suggested they were using 'magic wheels'". It is an interesting thought. Maybe the magic wheels (coach Dave Brailsford says they are "special round ones") come from the same skunk works that supplies the magic arrows which gave South Korea 75% of archery gold medals, the magic trainers that make USA so dominant in basketball and the magic balls that provided China's clean sweep in table tennis.

Unfair advantage is not an accusation that sterling often has to confront. The best it can usually achieve these days is to look less 'orrid than the opposition and, by managing expectations downwards, to avoid disappointing investors. It managed to do both of those yesterday with the unlikely assistance of the Bank of England. 

In its quarterly Inflation Report the Bank revised its forecast for UK economic growth to zero for the current year and said it would be two years before the situation began to normalise with 2% growth. Had they come out of the blue, numbers like that would have put sterling to flight. However, the downgrade had been so well flagged that it caused hardly a ripple. What did help the pound was Governor King's comment that an interest rate cut "would therefore in all probability have an element at least of it being counterproductive". It was not exactly a promise that the Bank Rate would not go down but it was good enough to change the minds of investors who were expecting a cut in the next month or two.

The removal of the rate cut threat alleviated some of the pressure that sterling had felt since the European Central Bank unveiled its grand plan to save the euro. The pound picked up the best part of a US cent, a good half euro cent and three quarters of a yen. It was better against the commodity dollars, if not by much. 

The antipodean dollars were both affected overnight by jobs figures. A -0.1% fall in NZ employment and an uptick in the rate of unemployment to 6.8% cost the New Zealand dollar a quick cent. Three hours later Australia reported 14k new jobs and 5.2% unemployment; the Aussie dollar responded by strengthening, reluctantly, by a little over half a cent against sterling.

Chinese ecostats early this morning showed inflation slowing to 1.8%, industrial production rising by an annual 9.2% and retail sales up by 13.1%. Japanese machinery orders were up by 5.6% in June but down by -9.9% on the year.

There are no top-tier data on today's timetable. The UK balance of trade this morning is the only serious European statistic. The Canadian and US trade figures follow after lunch, together with Canada's new housing price index and American weekly jobless claims. The US Treasury will raise money this afternoon through the sale of 30-year bonds at an interest rate well below 3%. In Madrid and Rome they will watch it and weep.