Sterling / Euro and US Dollar
Sterling has rallied substantially against a basket of major currencies during trading this morning, trading up towards 1.2300 against the Euro and holding above the key $1.5000 support level against the U.S Dollar.
The dollar began the week on the defensive, after markets adopted a cautious approach over the outlook for the U.S economy.
Markets are becoming anxious ahead of the repayment of nearly half a trillion euros of one-year funds to the European Central Bank (ECB) which is due to occur later on this week. Much of the funding is anticipated to be rolled over by shorter term maturities – which should potentially leave a sufficient amount of liquidity in the system.
Markets are also closely watching for the outcome of debt auctions by France and Spain later in the week after demand for Italy’s sale of €7 billion of government bonds yesterday was described as ‘lukewarm’. Traders are also reluctant to place bets against the dollar ahead of Friday’s release of the U.S non-farm payrolls report for June.
This morning sees the release of the European Commission’s closely watched business climate and sentiment surveys for June. These reports could further underline concerns about the pace of economic recovery in the euro-zone, and are likely to weigh further on the euro.
Later in the day the attention will turn to the U.S where the Case Shiller House price index for April is due for release alongside consumer confidence for June.
The latest survey for the U.K housing market by Hometrack has confirmed that house prices in the United Kingdom are continuing to rise but the report also confirmed that the rate of appreciation appears to be cooling. The number of houses being put up for sale rose at a faster rate than the number of buyers, which could further limit price rises in the months ahead. The average property value in England and Wales is now £165,314, according the Land Registry’s figures.
EUR/USD
The euro has fallen back below the $1.23 level versus the U.S dollar, after a general spike in risk aversion created a fresh wave of selling on the back of funding concerns following a dip in Asian and U.S stocks.
European interbank rates hit their highest level in almost seven months yesterday as markets get anxious ahead of the repayment of nearly half a trillion euros of one year funds to the ECB later this week.
ADDITIONAL NEWS:
Following the G20 Summit in Toronto, which took place over the weekend – China has set the exchange rate for the Yuan at its highest level in five years, after previously saying it would make the currency more flexible. China has come under increasing international pressure to allow the Yuan to appreciate. The U.S have argued that the weak Yuan gives Chinese exporters an unfair competitive advantage. At the G20 meeting, Barack Obama expressed his hope again that China would allow the Yuan to rise over the next few months.
Data Released 29th June
FRA 07:45 – Consumer Confudence (June)
UK 09:30 – Consumer Credit – Mortgage Applications (May)
EU-16 10:00 – ECB Economic Sentiment Survey (June)
EU-16 10:00 – ECB Business Climate Index (June)
US 14:00 – Case Shiller House Prices (April)
US 15:00 – Consumer Confidence (June)
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