Sterling nears three year high against the Euro despite retail sales and house price data falls
11/Jul/2012 • Currency Updates•
Sterling hovered near a 3 and 1/2 year high against a softer euro on Tuesday, shrugging off expectations of more weak UK data after a meeting of eurozone finance ministers failed to inject confidence into the market. Sentiment towards perceived riskier currencies was muted after European ministers made little progress overnight towards using the bloc’s rescue funds to combat soaring Spanish and Italian borrowing costs. Against the safe-haven dollar, sterling dipped 0.1 percent, holding steady despite retail sales and house price data released earlier yesterday that reflected a weakening British economy. British retail sales rose 1.4 percent in June, the British Retail Consortium said, far below the 2 percent estimated by analysts, while UK house prices fell more than expected.
Sterling fell to a session low against the dollar on Tuesday after Bank of England Governor Mervyn King said the British economy was not showing signs of an impending recovery and expressed concern about the outlook for exports.
The euro weakened versus majors over concerns that Europe isn’t doing enough to solve Spain’s debt problems. Eurozone finance ministers announced an extension to Spain’s deadline for cutting its fiscal deficit, and agreed to make €30 billion ($36.94 billion) available to Spanish banks by the end of this month.
The measures helped keep Spanish 10-year bond yields below 7%. The euro steadied in Asian trade this morning but hovered near two-year lows against the dollar as investors fretted about the outcome of a German court hearing on the eurozone bailout fund, the latest obstacle to efforts to beat the region’s debt crisis.
The political hurdles and investor scepticism about European Union’s decision-making process are likely to ensure the single currency will remain under pressure for some time, market players said. Today we will see the latest German 10-year “Bund” auction figures.
The dollar pushed to a 2-year high against the euro on Tuesday as comments from Italy’s prime minister sparked a fresh wave of nerves about the eurozone crisis.
Today, US FOMC minutes will be a key event in the market and remarks on the release will be the biggest event risk.