• Sterling has benefited in recent months from being seen as a safe haven alternative to the euro zone's fiscal turmoil, although some market players said the gloomy outlook for the UK economy could limit the pound's gains.
• The pound fell to its lowest level in a month versus the dollar on concern efforts to pull the U.K. out of its first double-dip recession since the 1970s will be hampered by the euro-area crisis and declining global growth.
• GBPUSD’s fall from 1.5516 to 1.5389 was also down to positive US Jobless Claims data. Looking ahead a break and close below 1.5380 could again revive the possibility of a significant down trend. Although, this levels looks like it could hold for now with any intraday bounces being capped at 1.5530.
• GBPEUR had opened trading at 1.2655, before falling to 1.2632, and overall had a quiet day with a mere 35 pip trading range, finishing at 1.2642. A close below 1.26 will be needed to relieve immediate upside pressure.

WORLDWIDE

• Chinese Q2 GDP slowed to 7.6% y/y, although still a fantastic growth figure, it marked the sixth consecutive quarter of decline and revealed the slowest growth pace since the first quarter of 2009.
• Moody’s downgraded to Italy overnight to Baa2 with negative outlook. A Baa2 rating from Moody’s sees Italy now one notch below S&P and two notches below the Fitch rating. This could further weigh on euro sentiment and will likely see increased focus on the Italian bond auction this morning.
• EURUSD fell to another fresh 2 year low of 1.2164 from 1.2245. Key support still comes in at 1.2132, any bounces should find near-term resistance at 1.2336
• The euro's drift lower came in spite of a surprise rise in euro-zone industrial production data for May, which showed output climbing 0.6% on the month, compared with expectations for a 0.2% fall. However, the year-on-year drop of 2.8% was the biggest since December 2009, highlighting the weakness of the sector
• Spain is looking to tighten next year's deficit targets for regional governments and plans to leave this year's targets unchanged despite the European Union loosening overall targets for the country, Spain's government set a target of 1.5% of gross domestic product for the regions' budget deficit in 2012, and of 1.1% of GDP in 2013
• Unemployment in Greece continued to rise, April’s figure rose from 22.5% from 20% in March.
• Investors sold perceived riskier currencies against the dollar after the release of June minutes from the Federal Reserve, which suggested growth in the world's largest economy would have to worsen for the central bank to launch more quantitative easing.
• In a surprise move overnight the Bank of Korea cut interest rates 0.25% down to 3%, citing signs of US economic deterioration, problems in the Eurozone, and slower emerging market growth. Brazil also recently cut interest rates by a 0.50% down to a historically low 8%. Add that to the easing measures of late by the US, the UK, the EU, Australia and China and it becomes clear that global growth could soon get markedly worse.
• US Initial jobless claims fell by 26,000 to a seasonally adjusted 350,000 in the week ended July 7, sending claims to their best level since March 2008. And if this trend continues it could validate the Fed’s decision to hold back on another round of Quantitative Easing as the market could be recovering on its own without their additional assistance.
• U.S. mortgage rates dropped, with 30-year loans reaching a record low for a fourth straight week, amid signs of improvement in the housing market. The average rate for a 30-year fixed mortgage fell to 3.56 % in the week ended today, the lowest in Freddie Mac records dating to 1971, from 3.62 %.
• ZAR fell to its lowest level this month as bond yields dropped to a record on speculation South Africa’s central bank will follow Brazil and Korea in cutting interest rates to stimulate growth.

DATA RELEASES (09.00 GMT)

INTERBANK RATES (09.00 GMT)