Pound strength against Euro as U.K data is better than expected and Spain gets a helping hand

The pound made great gains against the Euro but took losses  against most other currencies following UK data released yesterday. Both  Industrial and manufacturing production figures came in better than expected  although it probably had more to do with the longer month, with the end of May  bank holiday rolling into June for the Queens Jubilee. The flip side is that the  figures for June (to be released next month) are likely to be worse than usual  (having lost two working days in June) and there could be a nasty surprise  waiting. Retails sales numbers from the British Retail Consortium pointed to  growing sales in June but below forecast and most likely down to wet weather  even with the Jubilee. With weak GDP expected to continue it would seem the UK  will most likely stay in recession. Although rates for GBP EUR are particularly  favourable now, and hovering around that 4 year high, another quarter of  recession is likely to hinder sterling substantially and a slide could easily  follow at some point soon pushing rates back down to the 1.22 / 1.23 levels. Be  sure to take advantage of these upper levels whilst they are available now.

Spain get extension, personally I feel they have been pretty much bailed out already

The Euro took sizeable losses yesterday despite a positive show from EU  leaders, having given Spain an extra year to reach its targets and trying to get  aid to Spanish banks. Normally this would be Euro positive but on this occasion  the markets seemed disappointed that more was not being done. At the same time  focus is moving towards the German court hearing. So what’s the hearing all about? The issue is to do with the European Stability Mechanism (ESM) and  whether the new bailout funds and rules are compatible with national law. The  case is expected to take weeks rather than days and may create a lot of red tape  within the EU, to the extreme scenario it may prevent funds from becoming  available to combat the crisis and hence this is a risk for the Euro. This is  going to be topical and so expect volatility on the back of it this week.

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