Rising Home Prices Boost Pound

The euro remains under pressure and hit a four month low against the pound on Monday. The pound traded below 88 pence per euro after a survey showed that UK house prices increased in January. Home prices in England and Wales rose 0.4% in January. Mitul Kotecha of Calyon, the investment-banking unit of Credit Agricole SA stated, “Data such as house prices and consumer sentiment are showing some signs of improvement. The pound is among our favorite currencies this year. A lot of negative news has already been in the price.” Economists believe that the UK’s economy is showing signs of recovery. The Bank of England cut its key interest rate to a record low of 0.5% and engaged in an a 200 billion pound asset purchase program. The pound also gained on speculation that US based Kraft Foods will increase its bid for Cadbury showing that demand for UK assets is growing.

Greece Casting Shadow on Euro

EU finance ministers met today to discuss the Greek fiscal crisis. Most believe the finance ministers are running out of patience with the Athens government and that the finance ministers have been repeatedly misled by the Greek government about the size of the nation’s budget deficits. Greek fiscal concerns have pressured the euro during recent trading sessions. Rob Minikin of Standard Chartered in London said, “The Greek developments are definitely casting a shadow on the euro. It underlines how a strong euro could compound problems in the region, and reinvigorates the argument for a weaker euro.” The euro weakened broadly last week after the European Commission said that there were “severe irregularities” in the economic data Greece used to calculate its deficit.

Bank of Japan to Maintain Current Policies

The yen fall against most of the 16 most traded currencies after Masaaki Shirakawa, Governor of the Bank of Japan said the central bank will continue its deflation fighting policies. Addressing a quarterly meeting of regional branch managers Shirakawa said, “The central bank is aiming to maintain an extremely accommodative financial environment.”