Sterling maintained its highs against the euro in spite of disappointing retail sales figures and house price data released. Nevertheless, the pound remains weak against the greenback as investors continue to look for safe haven assets so as to avoid the turmoil in the eurozone. Over in China, data suggested weakened domestic demand, further denting the outlook for global growth and once again pushing investors towards less risky investments.

Sterling

Sterling begins session trading close to four-year highs against the single currency in spite of disappointing BRC retail sales data released. Whilst sales in June rose by 1.4 per cent, this was significantly lower than the two per cent increase that had been hoped for. Analysts had been anticipating a sales boost coming from the Jubilee celebrations. The data cemented the view that domestic consumption remains suppressed and that the UK remains an economy in recession. Adding to the gloom was the latest RICS house price survey that showed a decline of 22 points. Output figures due for release are expected to remain weak with trade figures seeing some small improvement.

US Dollar

The US dollar remains well supported as the safe haven currency of choice for investors looking for respite from the euro zone. The dollar maintained high against the single currency and sterling. Consumer credit surprised to the upside with an increase of $11 billion but had little impact. Instead, traders preferred to focus on the latest high level meeting of Financial Ministers in Europe.

Euro

The euro’s woes continued as markets awaited news from the EU FinMin meeting. In exchange for more spending cuts Spain was given an additional year in which to meet its three per cent deficit target. It was also agreed that 30 billion euro would become available at the end of the month should Spain need funding on bank recapitalisation. Markets were not convinced by these latest announcements and, consequently, Spanish bond yields have already crept higher.

Japanese yen

Weaker equity markets have lent support toward the safe haven yen. Consumer confidence improved for the month of May but June figures showed a weakening. Yen traders will continue to focus on regional growth after Chinese data showed imports coming in half expectations.

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