The Euro strengthened against the dollar yesterday despite poor economic data released in the eurozone. As reported yesterday the German Consumer confidence indicator published five year lows. Further gloom for Europe followed with Spain's National Statistics Institute announcing yesterday that Spanish house sales for the month of May slumped. Spain who have experienced a real estate boom over the past ten years are now reporting house sales down by 34% year on year in May coupled with plummeting house prices. This continuation of negative news in the eurozone limits the ECB's scope to raise interest rates coupled with the inflationary pressures will most likely leave Euro interest rates fixed at 4% next month.

In the UK the Mortgage Approvals data will be released this morning, it is expected to highlight the downturn of the UK housing market and for a further month drop to new all time lows. The Land Registry figures publicized yesterday reported that last month house prices in England and Wales fell by a further 1% marking the tenth consecutive monthly decline, with the London housing market the worst hit. This is evidence that the UK housing market is still in a downtrend. Sterling's only benefit at the moment on the currency markets is down to its relative yield advantage.

There is no escaping the housing gloom as the International Monetary Fund warned they could not see an end to the US housing crisis. The IMF expects further losses for banks with two mortgage banks declared insolvent already this week. This data had a knock on affect on the dollar which steadied yesterday despite experiencing dollar strength over the weekend. Merrill Lynch gave weight to the gloom by proclaiming further write downs of up to $5.7billion in Q3. US stock market also felt the impact by dropping more then 230points highlighting that the severity of the current economic environment is not looking to settle.