High inflation is holding the Bank of England back from raising interest rates, and even some of the policy committee's more hawkish members have acknowledged the difficulty in setting monetary policy. In a newspaper interview on Thursday, Bank of England member Timothy Beesley said rates were "mildly restrictive", but that this was justifiable due to the inflation outlook. A recent poll has shown that it is widely expected that we will see rates kept on hold for now and cut later on in the year, providing a further negative outlook for the pound.

To add to the problems facing the US, growth is being hampered by soaring oil prices, a lingering housing slump and a credit crunch. This is part of the reason we saw such volatility yesterday as it leads to further fears that weak economic readings will encourage the Federal Reserve to keep interest rates on hold. The Fed is now expected to keep its key base rate pegged at 2.0 percent at a rate meeting due next Tuesday.

Particularly worrying for both European central bankers and politicians is the wide divergence in unemployment rates across the fifteen countries in the Eurozone. In Spain, for example, they are currently suffering a sharp housing led economic slowdown, with the official unemployment now stands at an uncomfortable 10.1% - up from 8.1% a year ago.

In Germany, however, the unemployment rate fell in the year to June, from 8.4% to 7.3%, though given recent economic data a future increase in joblessness might be expected. It is clear some nations need an interest cut more than others, piling more pressure on the ECB. As such ECB policy is likely to become a hot political issue over the next few months if the economic slowdown is as bad as many fear.