Market hopeful of ECB action
There’s optimism in the market that European leaders are inching towards a solution which is boosting the euro. The support from international investors is benefiting the Eurozone peripheral bond markets. The spread in bond yields for countries such as Italy and Spain relative to Germany continues to hold at lower levels.
Furthermore, in a week light of economic data releases, a continuation of this broad improvement in sentiment surrounding European financial markets is likely to remain euro supportive.
Representatives from the European Commission, ECB and the IMF met with Greek ministers to review Greece’s progress in meeting the terms of it bailout. Greece agreed on the need to strengthen policy efforts to support the economy and the troika will return in September to formulate a final decision on additional funding.
There are signs of a struggling UK housing market as the house price index fells for the first time in three months in July . Property values dropped by 0.6% in June to leave average prices down 1.3% on a year ago. UK retails sales fared slightly better but remained subdued in July despite better weather and the start of the Olympics, rising 0.1% compared to a year earlier. Two credit rating agencies have already put the UK economy on negative watch, suggesting they might take away the AAA rating if conditions deteriorate further.
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