The US budget negotiations appear to have become more fluid, while France and Germany are said to have come together over plans for a second Greek bailout. The news is supportive for broader market sentiment which has helped lift the euro, weigh on the dollar and other safe haven currencies such as the yen and Swiss franc. European leaders are gathering at an emergency summit in hopes of hammering out a second bailout package for Greece. The agreement seen between France and Germany will be discussed with other member nations.

Sterling

The minutes of the last MPC meeting at the central bank reveal a 7-2 vote in favour of leaving monetary policy unchanged. The unchanged voting patterned left sterling uninspired. Economic data due out might stir some movement in markets. Retail sales as well as public sector net borrowing figures are expected to show a stronger consumer demand for the month of June and lower borrowing numbers by the government.

US dollar

The news that existing home sales failed to live up to expectations, coming in at $4.77 million instead of a forecasted $4.9 million, surprised few. Investors shrugged their shoulders at the release and continued to focus on the bigger picture and the latest developments in the US budget negotiations and the European debt crisis. Talks between the White House and Republicans became more fluid and support the view that somehow the debt ceiling will be increased and the country will avoid a default.

Euro

The euro has found support early on the news the Chancellor Merkel and President Sarkozy have reached a joint position on a second bailout for Greece that would involve the private sector. The discussions are said to revolve around the usage of the EFSF in purchasing periphery debt outright, but such an option will still need to clear several hurdles. Investors will be given the opportunity to put further developments in the debt crisis on hold momentarily to focus on the latest economic data.

Japanese yen

Trade figures showed exports picking up and imports slowing. The data represents a more natural state of affairs suggesting that the Japanese economy is slowing recovering from the disastrous events of March this year. Exports on an annual basis were expected to slow by 4.1 per cent, but instead they slowed only by 1.6 per cent. The data is good for the economy, but has had little impact on the yen, which was driven by developments in China.

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