An increase in risk appetite this morning has sparked some interesting price action including a break above the 1.4200 level in EUR/USD. While the charts are indicating several potential break-outs there is a caveat insofar as a lack of momentum during holiday thinned trading has undermined recent break-outs. The EUR's gains this morning may therefore be vulnerable. Data this morning has been limited to German PPI (-0.1% m/m) and UK M4 (-0.2% m/m). Both of these releases were weaker than expected and support the view that any tightening from either the ECB or BoE remains some way off.
While UK M4 data was weaker than expected, Bank of England data also showed a rise in the number of loans granted for mortgages to 51.1K in June from 45K in May while the Rightmove July house price survey rose +0.6% m/m. Both these data are indicative of continued stabilisation in the housing market. However, the increase in the cost of fixed rate mortgages in recent weeks and rises in unemployment are moderating influences on the pace of recovery in the housing market. Cable has gained significantly this morning with the housing data adding weight to the general improvement in risk appetite. Cable has breached the 1.6500 level but is struggling to extend it gains significantly above this level.
The yen is out of favour across the board this morning. USD/JPY has continued to probe lower through the London session but EUR/JPY and GBP/JPY have met with resistance at the 134.50 and 156.00 areas respectively.
This afternoon, US June leading economic indicators will be of interest. Key focus for the week, however, lies with Bernanke's semi-annual report to Congress tomorrow.
