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The most remarkable thing about the week so far is just how ‘not bothered’ markets have been about the EU summit that takes place over the coming two days. This despite the fact that Germany has so far shown none of the signs of signs of compromise or about-turns as it has been prone to do at various stages of the crisis to date.  

As such, the best that can be hoped for is a bland statement regarding growth, jobs, at most exploring the possibility of some form of common bonds and similar for a banking union.   It will be enough to hint that something is being done, but not enough to be actually moving the issue down the road in a meaningful fashion.

Guest post by Forex Broker FxPro

Spain and Italy are hoping for more in terms of bond-buying but have yet to learn that this is no panacea for solving their crippling funding costs. How long Europe can continue to live from summit to summit, surviving largely on sticking plasters, remains to be seen. The only certainty is that it can’t last forever.

 

Commentary

UK house price data crawling lower. The latest data on UK house prices showed a further fall, the Nationwide index down -0.6% during June.   So far this year, prices are down 0.9% on this measure, reflecting in part the impact of the ending of stamp duty concessions which expired back in March. But it’s also the case that rising mortgage rates have likely been playing a part, 2-year lending rates having risen over the past year despite the additional GBP 75bln of quantitative easing undertaken by the Bank of England over this period. This is why expectations for more QE next month remain strong and the Bank and the Treasury are looking to introduce measures to get the pass-through on lending rates to households and businesses.

Yen falls back to sleep. Despite the relatively subdued nature of FX markets so far this week, it was the yen that was standing out in the early part of the week, in particular EUR/JPY which once again pushed through the 100 level. As is often the case, the yen has once again settled down after a brief burst of activity, with EUR/JPY holding tight in the 99.20 to 99.60 range through most of Wednesday’s session. USD/JPY nudged higher through the European session on Wednesday, but once again ranges were tight. On the positive side, the retail sales data for May that were released overnight came in firmer than expected, rising 3.6% YoY following the 5.7% rise seen in April.   With legislation to increase the sales tax now passed by the lower house this week, the risk is that we could see spending brought forward in the coming 18 months before the planned increase comes into effect.