‘Sterling is a troll in the beauty parade of global currencies’ opined one David Morrison, GFT’s Chief Strategist yesterday. “The UK’s horrendous budget deficits and a lack of political clarity about how they will be repaired and the fragile nature of the improving economic data leaves the pound vulnerable to a turn in mood.” The pound was certainly fragile yesterday.

GBPEUR continued its move lower yesterday falling to a low of 1.1408 in late afternoon trade. There are continued significant risks to the downside in the form of German IFO and UK GDP due Friday. German IFO is likely to follow ZEW which was a lot stronger than expectation.

Sterling is performing little better against the dollar although risk appetite is keeping the dollar’s gains in check somewhat. The news that Ben Bernanke has been nominated for a second term as Chairman of the Federal Reserve plus equity markets making new 10 month highs tempted speculators out of haven currencies and into riskier plays.

Following Friday’s increase in existing home sales signs are becoming increasingly bright that the US housing market is recovering. The Case-Shiller House Price Index rose for the second time in 3 years in June with house prices in the 10 and 20 largest metropolitan areas rising on average by 1.4%. Consumer Confidence was also higher as American’s expectations hit the highest level since the beginning of the recession.

Further US house news is available today in the form of New Home Sales at 15.00

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