Fundamental Headlines
• Euro, Pound Retain Gains – Wall Street Journal
• Europe Agrees on Stress Tests – Wall Street Journal
• Stress Test Decision Reassures Investors - Financial Times
• Bank Stress Tests in EU Face Questions Over Toughness, Government Backing - Bloomberg
• Weber Defies Trichet Over Europe Bond Bailout as ECB Succession Approaches - Bloomberg
GBP/USD: Mortgage approvals in the U.K. pushed higher in May, with figures showing the number of loans granted rose to 51K from 48K in April. The data comes on the back of the central bank leaving its asset purchase target unchanged at 200 billion in order to stoke lending. However, it is noteworthy that the Bank of England said that “demand for housing, especially among first time buyers, continued to be constrained by tight credit conditions.” Indeed, we continue to see banks hold a tight grip on lending as libor rates continue their northern journey amid lingering concerns regarding the European debt crisis. Meanwhile, the budget deficit in the world’s sixth largest economy was less than economists forecasts. Britain posted a 16 billion shortfall from a revised 8.3 billion pounds the month prior, while economists were expecting a reading of 18.0 billion. Looking ahead, though the U.K. has exited recession, the region faces a slowdown as fiscal austerity kicks in. Thus, we expect higher taxes and a weakening labor market to continue weighing on economic activity in the U.K. To discuss this and other reports, visit the GBP/USD Forum.
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Weekly Spotlight: Europe’s Outlook Progressively Worsens
Written by Michael Wright, Currency Analyst
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Michael Wright is the author of FX Headlines, Fundamentals vs. Technical’s, Weekly Spotlight, and Forex Trading Weekly Forecast
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