The pound rose against the euro as the sovereign debt crisis afflicting the euro zone periphery continues to dominate the markets but is falling against the majority of the other major currencies.
In UK data, Halifax reported that UK house prices rose in June by 1.2% from May with the average house in the UK now valued at £163,049. In the three months to June, a more reliable guide, house prices fell 0.5%, although that did mark the smallest fall in prices since the second quarter of 2010.
Commenting on the data after it came out, economists at Barclays Capital issued a note entitled, “UK Halifax house price index reports a small rise, but market conditions remain challenging,” adding that, “the reading from the Halifax survey was slightly more positive than the Nationwide data released last week, which showed house prices were flat on the month to June.”
The Recruitment and Employment Confederation (REC) and KPMG ‘Report on Jobs’ states that the number of people landing permanent jobs in June rose at its weakest rate in 22 months in the latest industry report. The report shows that recruitment consultants struggled to place as many people in both temporary and permanent jobs in June as in previous months and the number of permanent staff vacancies on agencies’ books rose at the slowest pace in six months.
The sovereign debt crisis in the euro zone periphery continues to dominate the world markets with the euro falling heavily against the US dollar and Japanese Yen and even registering an albeit smaller fall against the pound after the decision by credit ratings agency Moody’s downgraded Portuguese debt to “junk” status ahead of the announcement today by the European Central Bank (ECB) of the interest rate for the euro zone.
The majority of analysts agree that the ECB will move rates up by 0.25% to 1.5% this afternoon, which in theory ought to support the euro, but this tightening of monetary policy has already been priced into the market, which is always searching for new data to build into expectations.
What we do know is that the ECB is not alone in considering a rate rise a good idea. The People’s Bank of China announced yesterday it will raise its main interest rate to 3.5% on fears of an overheating economy.
This has sent a chill down the spine of investors worried about implications for growth in Asia, so they are looking for safety and have found it in the form of the Swiss Franc. It was up almost 1% against the euro and 0.2% against the US dollar.
In the long term, it is difficult to see a sustained rally in the euro until the debt problems for the euro zone are finally put to bed but with the US economy still spluttering investors are struggling to orientate themselves.
The Australian dollar shrugged off that a slowdown in China could dampen demand for its raw material exports and continues to climb in a volatile session in the Far East.
Commentary by Tony Redondo
“Any opinions expressed in this document are those of TorFX analysts. Any analysis and/or forecasts provided are aimed at helping clients understand market conditions and developing trends. Clients are wholly responsible for their own trading decisions.”
