Sterling set for a good week

Over the weekend Sterling dipped from the highs of late last week under pressure from by a weak UK house price survey that once again highlighted the fragility of the once booming property sector.

Prices for homes in England and Wales fell 3% in the past month according to property website Rightmove, citing economic uncertainty and low mortgage approvals and forecasting bigger falls throughout the next year.

This could be a massive negative regarding in the recovery of the UK economy over the coming year as housing prices is seen as one of the major driving forces of the British financial state.

Bond in the US continue to rise, enhancing the appeal of the dollar, following a proposal to extend Bush-era tax cuts that is seen boosting growth as well as the fiscal deficits.

The Federal Reserve meets on Tuesday with officials expected to assess the central bank’s second round of quantitative easing announced in November against the back drop of tax plans.

Tomorrow’s meeting will provide Fed officials with the opportunity to discuss the impact of its second round of quantitative easing announced in November. However, despite some recent better than expected data, the central bank is not expected to signal policy shift, particularly in light of November’s disappointing non-farm payrolls unemployment report.

Euro continues to have a difficult time of things and has started the week down at $1.32 versus the US Dollar, pressured by market concerns ahead of an EU Summit later in the week.

Heads of State meet on Thursday & Friday and traders will be waiting for any updates in terms of permanent mechanisms that are to replace the current EFSF and EFSM programmes.

Over the weekend Germany & France rejected calls for increases in the rescue funds and joint sovereign bonds or E-bonds but agreed to better align their task and labour policies.

More on the Euro debt situation will be announced throughout the week with some financial ministers calling for an increase in the figure that is made available for ailing countries if and when they need it.

The pound faces a busy data schedule this wee that includes the release of CPU, retail sales and unemployment reports for November, with the CBI distributive trades report for December is also due for release. All releases are set to be positive for the UK and we will wait and see what moves we see in the market that could enable GBP-EUR to break the heavily resilient level of €1.20.