The build up to Europe’s 19th summit on the sovereign debt crisis has kept traders mostly in defensive mode. That mood gave sterling little chance of capitalising startling retail sales data although the pound is still within touch of record highs.

The most notable development was more comments from Germany’s Angela Merkel issuing another reminder that Berlin will not sign-off on any short-term measures such as euro bonds that will help debt-strapped countries borrow their way out of trouble. Nevertheless, markets still harbour some hope of progress at a meeting, keeping the euro more or less range-bound during trading activity.

Sterling

The pound failed to take advantage of another heartening retail sales report with investors still very much wary of Britain’s economic landscape whilst pre-summit nerves kept most traders stationary. CBI’s distributive trade survey, which measures high street spending, surged to a level of 42 in June confounding expectation of a sharp slowdown from May’s 21 print to a balance of just 10.

US dollar

The US dollar took a brief tumble after robust US economic data gave equity markets a lift which in-turn helped encourage traders to lighten up on safe haven currencies. US pending home sales in May soared, beating analyst expectations by some margin to match March’s two-year high. Coupled with other more recent housing measures, the data suggested the country’s housing sector is now in recovery mode with consumers possibly taking advantage of record low borrowing rates and house prices.

Euro

Having moved on from Greece, the euro is poised for another political battle in Europe after Germany gave investors very little hope of seeing leaders put pen to paper on any “quick wins” that could help ease Spain’s fiscal plight. Speaking, Germany repeated its earlier stance that short-term measures which allow indebted nations to borrow their way out of difficulty will not wash with Berlin. Chancellor Merkel is, however, likely to put forward some impressive long-term solutions at the two-day EU summit.

Japanese yen

Consumer spending in Japan was estimated to have risen three per cent over the year in May. However, sales jumped by 3.6 per cent, and even though the figure represents a marked slowdown from the prior month’s revised 5.7 per cent print, it should ease some pressure on the Bank of Japan to take more monetary action.