Inflation pressures moderate. Canadian unemployment falls unexpectedly.

Last Monday's starting point was not quite the high of the week for sterling but it was very close. A one-cent dip on Monday afternoon was followed by two days of consolidation before a Thursday morning rally back to the high and a three-cent decline that took 36 hours to complete. On Friday afternoon the pound recovered a little ground to open in London yesterday morning two and a half cents lower on the week.

Another drought-ridden crop of UK economic statistics began with the British Retail Consortium reporting lower sales in May after April's bank holiday boost. It ended with the revelation that UK industrial production had fallen by -1.2% in the year to April and by -1.2% in the month itself. It was not all bad news though. Halifax reported a tiny 0.1% monthly increase for its house price index in June and offered a vaguely optimistic outlook: "Overall, we expect a moderate improvement in the economy during the remainder of 2011, which, combined with continuing low interest rates, is likely to support housing demand. This should prevent a further marked fall in prices and help to stabilise property values later in the year."

The scale of the moderation in that economic improvement was made clear by the National Institute for Economic and Social Research, with its estimate on Friday that the UK economy expanded by 0.4% in the three months to May. The trade figures were alright though, in a British sort of way. April's deficit was down to -4.4 billion from March's -4.5 billion. The producer price index showed a relaxation of the squeeze on manufacturers; the speed of their cost increases slowed from an annual 17.9% to 15.7%, while factory gate prices eased only slightly from 5.5% to 5.3%. For the month of May, factory gate output prices were up by 0.2%; input prices (costs) fell by -1.2%.

Thursday's Monetary Policy Committee (MPC) meeting was every bit the non-event it had been cracked up to be. Nothing changed and nobody said anything. Not until 22 June will investors discover from the minutes of the meeting who voted for what. The best guess is that the departure of Andrew Sentance from the Committee will have changed the voting pattern from 9-3 in favour of no change to 7-2.

The Loonie began the week with a dichotomous pair of statistics: building permits fell by -21.1% and the Ivey purchasing managers' index leapt 20% from 57.7 to 69.1. Surprisingly, there was no immediate reaction to either - figure but the Ivey PMI evidently lingered in the minds of investors, making them well-disposed to the Loonie for the rest of the week.

Wednesday's housing starts figure was not quite up to snuff. At 183.6k it fell short of the predicted 185k, but it was there or thereabouts and noticeably better than the previous month's 178.7k. The trade figures for April were a disappointment with a -$920 million deficit instead of the expected $500 million surplus. The disappointment was not enough, however, to prevent the dollar moving swiftly higher in response to dampening interest rate news from the European Central Bank.

Friday's Canadian employment figures were good enough. Unemployment fell from 7.6% to 7.4% in May and 22.3k new jobs were created. Both numbers were better than investors had expected. Normally they might have taken the Canadian dollar further, but on Friday the price of oil was on the way down. That development took the shine off what could have been another good day for the CAD, but still left it in pole position for the week among the major currencies.

There is less scope for excitement among this week's Canadian data. Motor vehicle sales, capacity utilisation, manufacturing shipment, international investment flows and wholesale sales don't really cut it for investors.

The two important UK statistics will be for consumer price index inflation and employment. The former loses most of its theoretical clout because everyone is aware that the MPC will keep interest rates as low as it can for as long as it can. The latter is critical to the economy and the currency; without jobs growth there can be no spending growth and no economic growth. Making up the numbers will be the RICS house price balance, consumer confidence (Nationwide's version) and retail sales.

The Loonie's strong performance has knocked sterling back down into what is now a seven-week horizontal trend. In the last 12 months the pound has remained almost exclusively within a ten-cent range and today it is smack in the middle of that band. Buyers of the Canadian dollar would be wise to continue to hedge their risk, fixing a price for up to half the money they need with a forward purchase.