The Pound made gains against the Dollar while remaining relatively unchanged against the Euro after a government report showed UK mortgage approvals remained near a four-month low. An index of house prices due for release this evening is expected to show no growth last month, extending the annual decline to 1.3%. With the British economy already lagging, continued weakness in the housing sector will likely add to investors’ expectations that the BoE’s policies will remain accommodative for the foreseeable future.
The Dollar declined against the Euro and the Pound as the Greek debt saga again steals the spotlight. Investors have been generally encouraged by news that the Greek Parliament passed they hotly debated austerity measures needed to secure funding for July, but the relief has been tempered by escalating protests in Athens. Nevertheless, global financial markets have cheered the developments as a success in the near term and both commodities and equities are in the black. Gaining risk sentiment is weighing on the dollar as investors seek the higher yields of currencies from the AUD to the ZAR. The market took note of US pending home sales data this morning, which registered better than expected at 8.2% m/m versus the 3.0% gain expected. The larger than expected gain comes a month after an 11% drop was recorded in April, suggesting that the residential real estate market may be rebounding from a slump in the first half of the year, or bottoming at the minimum. Falling home prices may finally be luring in potential buyers even with unemployment still over 9% and with banks’ more stringent loan requirements. The dollar will likely remain under pressure against most currencies as market risk appetite rebounds.
The Euro made gains against the Dollar while remaining relaitivly unchanged against the Pound after trading through an extremely volatile European session. The Greek Parliament passed their budget this morning by a small majority, and global financial markets sighed with relief. Meanwhile, police fired tear gas at protestors on the streets of Athens, and focus has begun to shift on how and if the government will be able to implement the stringent cuts to the country’s welfare apparatus. Nevertheless, a disaster appears to have been avoided for the time being, and European banks will likely have time to sure up their balance sheets in the event of a default or reprofiling. The common currency has also gained support over the past 48 hours as investors begin to price in higher interest rates. Now that the Greek situation has been addressed, the ECB’s comments about their “strong vigilance mode” are expected to translate into an interest rate hike as soon as next week.
Data released 23.06.2011
EU 10.00 Flash HICP (June)
US 13.30 Initial Jobless Claims (w/e 25th June)
US 14.45 Chicago PMI (June)