Sterling declines against the dollar as unemployment rises and the CPI comes out

The British Pound trimmed its gains against the greenback on Tuesday after data showed that annual UK consumer price inflation fell below the Bank of England's 2 percent target, and UK unemployment rose to 7.6% suggesting that price risks continue to recede as the economy remains weak. The Office for National Statistics said UK consumer prices rose 0.3 percent on the month in June, taking the annual rate to 1.8 percent. The GBP/USD is currently trading at $1.6380 as of 8:48am, London Time.

The greenback and the Japanese Yen strengthened against the euro after CIT Group Inc. said it probably won’t receive a federal bailout, spurring speculation the U.S. commercial lender will file for bankruptcy. The commercial lender may go bankrupt,” said Toshihiko Sakai, head of trading for foreign exchange and financial products in Tokyo at Mitsubishi UFJ Trust & Banking Corp., a unit of Japan’s largest bank. “The government may perceive there’s not much need to provide financial aid. This may cause buying of the yen and the dollar as safe-haven currencies.” The yen ended three days of losses against the euro after CIT said in a statement yesterday “there is no appreciable likelihood of additional government support being provided over the near term.” The EUR/JPY is currently trading at 132.10 as of 8:54am, London Time.

Company shutdowns in Canada's auto and mining sectors caused factory sales to plummet in May, setting the economy for another sharp contraction in the second quarter. The report follows figures that showed a dismal export performance, when Canada had the biggest trade deficit on record. Factory sales fell across 17 of 21 industries in the month but the sharpest declines were in transportation equipment because of cuts in the auto industry and in primary metal processing. The Bank of Canada is expected to keep interest rates steady at its policy announcement date next Tuesday after having cut rates to a floor of 0.25 percent and promising to hold them there until June 2010. The USD/CAD is currently trading at 1.1195 as of 9:08am, London Time.

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