The Pound declined against the Dollar and the Euro yesterday as a Bank of England policy maker, Martin Weale commented that the UK may fall back into recession. Weale commented that there is a significant chance the economy will contract over a four-quarter period. Furthermore, risk aversion flows added increased pressure on the Pound.

The Dollar made gains against the Pound and declined against the Euro as Existing home sales for July fell 27.2% to 3.83M sales vs. the previous 5.37M and 4.65M eyed, instilling further fears that the real estate market may move the economy back into recession. Furthermore, the Richmond fed manufacturing index posted a decline for August to 11 from the previous 16. This fell in line with last week’s weak Philly Fed data. Today we see durable goods orders and new homes sales figures which is expected to give investors more light into the recovery sentiment of the US economy.

The Euro moved higher against the Dollar and the Pound yesterday, holding above the 1.2600 support level as industrial new orders posted a 2.5% rise vs. 1.5% eyed for June. According to Bloomberg, the index increased by 4.1% on a monthly basis in May, suggesting that investor focus will maintain in US releases until new Eurozone fiscal challenges resurface. The focus today will be on the German IFO survey. If data comes in better than the expected 105.7, investors may see the euro recover more of last week’s losses against the Dollar.

Data released 25.08.10

US      13.30 Durable Goods (July)

US      15.00 New Home Sales (July)