The pound weakened against the euro during the overnight trade after a Rightmove report showed that London house prices fell the most in a year. Asking prices for homes on sale fell 3.4% in August from the previous month amid turmoil in the financial markets. Sterling was undermined last week after Chancellor George Osborne said on Thursday that the UK’s recovery will “take longer and be harder” and BoE Marvyn King signaled a day earlier he may resume pumping cash into the economy to boost growth. There are no data releases or policy speeches scheduled for today. Looking to the week ahead, consumer price inflation data for July headlines the economic calendar, with the expectations for the figures to increase slightly to 4.3% on yearly basis. Also scheduled for this week are the minutes from the August MPC meeting and labour market data on Wednesday. The expectations for the ILO unemployment rate is to remain unchanged at 7.7% in Jun. On Thursday and Friday we receive July releases of retail sales figures and public sector borrowing data respectively.
The euro gained against most of its major rivals on speculation that meeting tomorrow between French President Nicolas Sarkozy and German Chancellor Angela Merkel will ease debt concerns affecting the single currency. France, Spain and Italy imposed bans on short selling to stabilize the markets after continental banks hit the lowest levels since credit crisis. EU Economic and Monetary Commissioner Olli Rehn said that he does not see Italy, Spain or France requiring aid as these countries are taking “the right steps” to balance their budgets and stimulate economic growth. Looking to the week ahead, German preliminary Q2 GDP figures headline the economic calendar, with the expectations for the Eurozone’s largest economy to expand by 3.2% on yearly basis.
The dollar dropped during the overnight trade ahead of the Empire State August survey of manufacturing activity. The broad consensus is for the gauge to have climbed out from the negative territory to stand close to 1 from –3.8 in July. Greenback dropped against most of its rivals last week after Federal Reserve left interest rate at 0.25% and committed to leave benchmark rate unchanged until mid 2013. However, US bond yields have fell even though the S&P downgraded the nation’s credit rating on August 5 to AA+ from AAA. Moody’s Investors Service and Fitch Ratings affirmed their top grades on US. Looking to the week ahead, the Philadelphia Fed index (Business Outlook Survey) is scheduled for Thursday and is expected to have increased to 3.5 in August after reaching 3.2 in the previous reading.
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