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UK consumer confidence may be growing as Greece looks forward

Consumer confidence in the UK hopefully increasing as house prices rise.

GBP £

Yesterday’s data included the Rightmove HPI, showing house prices had risen by 1 percent. Consumer confidence will be revealed today, this is expected to show a better reading than last month, however, only slightly and figure of 45 is expected.

Official HPI, CPI and RPI are all released today at 9:30. Expectations are for HPI to show a rise in prices by 0.3 percent; CPI to remain flat at 3 percent and RPI to fall from 3.5 to 3.3 percent. Employment figures are due out tomorrow, showing unemployed and average earnings.

USD $

USD has weakened slightly against the Euro owing to the expectation of further QE in the US. Data out today will show that housing starts and building permits have remained flat at around 730k.

Tomorrow there is an FOMC statement which could include plans for further monetary easing, although the capacity of any further easing is unclear. It is expected that a full blown QE3 could be avoided in favour of an extension to ‘operation twist’ which was implemented last year.

EUR €

Economic sentiment in Germany and Europe is announced today. It is expected that a huge drop in sentiment in Europe, -5.7 against -2.4 previously, will be matched by a drop in sentiment in Germany, 10.8 previously now 3.6. After early gains from the Euro following the weekend’s pro-bailout party victory in Greece it seemed that market makers remembered the struggles with the Spanish economy.

Following a short term relief in yields the Spanish 10 yr bond price pushed higher to 7.3 percent, which is a Euro-Era high. This pushes borrowing costs to levels seen as unsustainable despite the recent €100bn loan to Spanish banks. The two major parties in Greece, PASOK and the New Democracy party have agreed in principle that they need to form a government before time expires on Thursday. This isn’t quite as simple as this agreement though, they would both like to renegotiate the harsh terms of the austerity package that has been implemented as part of their bailout, which may be more likely now President Hollande of France is part of the decision making process.

As we know, Mr Hollande has been a strong advocate of growth over austerity, although, due to the dire situation in Greece it is expected that only small concessions, if any, would be allowed. Angela Merkel, however, has again reiterated her requirement that Greece stick to the plan that has been put in place, although, how much pressure it will take for her to allow some concessions remains to be seen.

Once a plan has been formulated by the two parties in Greece they will confirm a government and try to take Greece forward with more efforts to implement growth.

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