Sterling saw a second day of losses after the release of more dovish than expected minutes from the Bank of England. The MPC voted 7-1 to keep interest rates on hold and unanimously to keep the £200bln asset purchase scheme unchanged.  The decision had been expected by the markets but what disappointed analysts was the lowering of growth expectations. According to the minutes growth in the U.K. was likely to weaken slightly due to fiscal tightening in addition future growth prospects had already weakened since the last BoE meeting. Inflation expectations added further uncertainty as price pressure is expected to remain high for the remainder of 2010 but move back to target in the medium term. Confusion and uncertainty rained as the minutes suggested a need for higher rates to combat inflation but that the risks to growth are significant enough to prevent any such action.

Strong corporate earnings from Merrill Lynch and Wells Fargo kept the Dollar range trading for the afternoon but the testimony before congress by Fed Chairman Ben Bernanke sparked safe haven buying of the dollar. Bernanke said the U.S. economic outlook remained “unusually uncertain” and that the central bank is ready to take steps to keep the recovery alive.

The Euro has strengthened this morning after the release of better than expected German PMI services and manufacturing data and is aiding the pound versus the dollar as well.

This morning U.K. retail sales and E.U. industrial new orders are expected to be released. For this afternoon U.S. jobless claims, existing home sales and leading indicator data is scheduled for release and Bernanke continues his testimony before congress.