Positive employment data continues run for sterling

• Positive UK data continues with employment rising

• Euro remains on the back foot, though Portuguese nerves settle

• US data mixed reflected in Yellen's comments

• Japanese minutes out overnight

The data out of the UK continued to be positive, with unemployment sliding to 6.5% as forecast. This is the lowest level since late 2008 and the number of people in work rose to a record 30.6 million as the signs of economic recovery strengthened. Jobless claims - a narrower measure of unemployment - fell by 36,300 in June beating the 27,000 forecast drop.

The Bank of England put the labour market at the centre of policy making earlier this year, with base rate likely to be kept at 0.5% until more slack has been used up. Though unemployment continues to fall and Tuesday's figures showed inflation accelerating, pay is rising at its slowest pace for five years, which will allow policy makers some breathing space. Wage growth in the three months to May slowed to 0.3 percent, the lowest since May 2009.

The data from Europe was limited to the trade balance which came out at EUR15.4bn compared with the expected EUR16.5bn. ECB member Nowotny helped the euro lower, suggesting that low inflation and low growth will stay for some time and highlighting some of the risks this poses of potential side effects and market bubbles. A report published yesterday by the ECB showed the euro’s share in global reserves decreased by 0.9% to the end of 2013 to 24.4%. That said, the euro remains the second most important reserve currency, though the trend since 2008 of a reduction in holdings continues.

European stock markets had a strong day as fears about Portugal faded though it didn’t translate to euro strength. Instead the euro continued its slide, hitting fresh lows against sterling and the US dollar, with the important 1.35 level getting close and a Goldman's note reiterating expectations of further euro weakness over the next year. The only European data out this morning is Europe wide inflation, expected to be flat month on month.

The US had a busier data calendar, with Industrial Production just about showing growth at 0.2% (expected 0.4%), and revisions down on previous months. This showed a slide back from last month with plenty of slack still to be taken up as capacity stayed unchanged. Expectations of improvements faded as this highlights the limpness of the manufacturing recovery in the States. We also saw June 2014 US PPI beating expectations (0.4% vs 0.2%) but confirming weaker prices from last month - and calming any inflation concerns, just in case there were any! The beige book report continued to show modest to moderate growth on consumer spending and manufacturing, though the market is unlikely to buy into this until we have an undeniable dollar trend.

There was further hawkish noise from Dallas Fed president Fisher suggesting that we are closer than many think to reaching goals on jobs and inflation. His views are increasingly at odds with some Fed colleagues as he claimed the Fed is at risk of keeping policy loose for too long and it is dangerous to think that the tightening policy will work effectively if we overshoot on the employment goal. This is another Fed member who is making remarks similar to Carney about hikes in interest rates yet the market is watching the data first and the rhetoric second.

The second instalment of Yellen carried little further by way of surprise, though she stressed that the employment picture showed more distress than the unemployment rate signals. Alongside a strong equity performance in Europe, the S&P 500 finished the day up 8 points to 1981. It seems inevitable that we will see a break to fresh highs through the 2000 level in the near term. Highlights of the data calendar this afternoon will be the housing starts, jobless claims and the Philadelphia Fed Manufacturing index.

The Bank of Canada talked about serial disappointment in their latest statement as they showed frustration at the repeated false dawns in growth in Canada and elsewhere. This was repeated numerous times in the press conference and made it very clear that they are in wait-and-see mode for the longer term. The market was initially focused more on the short term and the shift to neutral policy with less worries about disinflation gave the Canadian dollar a shot in the arm.

Overnight, we will see policy minutes from the Bank of Japan, with no further measures expected, and a reiteration of how the current policy is working.

Have a great day.