Forex snapshot

The euro has edged higher versus the US dollar after eurozone inflation remained unchanged in June, while the pound has dipped after UK mortgages drop to an 11-month low.

Euro and US dollar notes
Source: Bloomberg

Euro higher after CPI figures

The euro is trading at $1.3656; it made a small advance after the consumer price index for the region came in at 0.5% for June and no change on the month, which was in line with expectations. Interestingly, core inflation ticked up to 0.8% from 0.7%.

The latest CPI report from the eurozone will give Mario Draghi the excuse to not announce additional monetary easing at Thursday’s meeting however, I do foresee him hinting at more easing in the future. Ideally, the European Central Bank president would be able to talk the currency down rather than use the tools available to him.

The euro may drift towards the 200-day moving average of $1.3688 between now and the ECB meeting on Thursday at 1.30pm (London time). The downward pressure on the euro is likely to kick in towards the end of the week and it could target $1.3575.

Sterling slips as mortgages fall

The pound is trading at $1.7019, after the latest mortgage approval numbers put pressure on the pound, showing further proof that the UK property market is cooling off.

Mark Carney has previously cited a strong property market as a hindrance to the economic recovery, and last week’s report from the British Bankers Association revealed the lowest mortgage approvals since August 2013. It was announced at the Mansion House meeting that the Bank of England would now have the power to set mortgage lending for banks. We are now likely to see a slowdown in the rate of growth in the British property market.

If the pound holds on to the $1.70 mark it could target the $1.7051 region. However, a strong UK manufacturing report tomorrow could see it target $1.6953.

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