Sterling escaped the day relatively unscathed, despite further disappointing domestic news, and a better than expected GDP result from the US.

The lack of credit flowing through to the real economy was highlighted by figures revealing that investment by businesses in the UK last quarter fell 10.4%, the biggest decline in this reading since the mid 80’s. Policy makers continue to scratch their heads for solutions to force institutions to extend much needed credit in the wider economy, while the pound will continue to be weighed by these worries.

Further undermining the pound were the rambles of the FSA’s head Adair Turner, who suggested that the financial industry requires a major reconstruction, and among other things proposed a ‘Tobin tax’, essentially a tax on financial transactions. As the UK is perceived as an economy highly exposed to the health of the financial sector, it was of course further bad news for sterling.

US GDP for the second quarter of the year saw a better than expected revision, showing that the largest economy in the world only shrank by 1.0%, with consensus for a 1.5% decline. The dollar struggled to capitalise, as did equities worldwide which finished largely down for the day.

Yesterday’s investment figures set us up for the second reading of GDP for the UK, the main piece of data for the day. The consensus view is for a contraction of 0.8%, however, a worse than expected reading should see sterling delivered another shove downwards. The only other data of note will be US personal income and spending levels, as well as an inflation figure.

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