Euro Rebounds on Dollar Weakness, Shrugging Off Softer Economic Data (page 2 of 2)

The lack of reaction in the currency may be due to the fact that the rise in approvals was related to the planned introduction of home information packs (HIPS) on August 1 for home with four bedrooms or more.

These HIPS contain legal documentation with title information and an Energy Performance Certificate, detailing the energy efficiency of the home. Sellers of homes that fall under the rules, which eventually will spread to all homes, are now obligated to supply this information to buyers rather than buyers obtaining the information themselves.

The cost to the seller is several hundred pounds and the effort is substantial. Overall, the housing market is still performing well despite a recent decline in prices. We will get more insight on how that has affected consumer confidence tomorrow with the release of the GfK survey. The CBI industrial trends survey is also due for release

Yen weakens after Japan's LDP loses majority

The Japanese yen was dealt a double blow with a LDP defeat and a rebound in equities. Prime Minister Shinzo Abe is fighting to save his job after the LDP party lost its upper house majority. This means that any policies and reforms that Abe wants to pass in the future will probably be met with stiff resistance.

The impact on the currency should be only short term however as long as Abe is not forced to resign. The longer term driver of carry trades will be the global growth outlook and with liquidity conditions.

Unfortunately August is never a good month for liquidity because of summer holidays. It is earnings season in the US right now, so keep watching the corporate calendar for more good or bad news.

After tonight's Japanese economic releases, there is nothing of consequence for the remainder of the week. We are expecting Japanese overall household spending, labour cash earnings, PMI, personal income and the jobless rate.

Usually spending and earnings is the most important because they represent the weakest part of the Japanese economy. Retail trade last week was particularly weak. The lack of recovery in both is one of the primary reasons why the Bank of Japan has not been able to raise interest rates.

Mixed data leads to mixed performance in commodity currencies

High yielding currencies like the Australian and New Zealand dollars licked their wounds today. Economic data released overnight was mixed with home sales in Australia decreasing but business confidence increasing. New Zealand saw a drop in money supply growth but an increase in building permits.

Even Canada was faced with mixed reports; industrial product prices fell last month while raw material prices increased. Even though more data is due for release from Australia and New Zealand tonight we do not expect much more clarity until Wednesday when we get the Australian trade balance and retail sales figures.

Canada has GDP due for release tomorrow. Strong retail sales and trade balance figures suggests that growth in May could have been strong.