World currency markets - Spanish property prices 18th July 2006

Summary of news:

• Markets still looking mainly at the Middle East for direction, with talk of a possible cease-fire
between Israel and Hezbollah overnight prompting a downturn in safe-haven gold and oil prices
at one stage.

• Meanwhile, US Treasurys are a smidge firmer after Wall St pared intraday gains to end broadly
flat and JGBs are also bid as the Nikkei catches up with geopolitical losses elsewhere after
yesterdays Japanese holiday.

• This should help EU bonds off the open, but Gilts may lag again after more very strong UK
house price data (RICS headline +28 in Jun from a revised 21 in May - was 20).

• Ahead, UK Jun CPI, German ZEW and US Jun PPI


UK DATA:

• 09:30 UK CPI (Jun) % month on month

• CPI inflation rose 0.2pp to 2.2% in May, above target for the first time in seven months.

• UK Jun House Prices See Strongest month on month Rise In 2 Years - RICS. Net 28% Surveyors

Saw UK House Prices Up In 3-Months To June House price inflation accelerated sharply in the
three months through June, but a "mini-boom" in London and the South East distorted the overall
national picture. The latest survey by the Royal Institute of Chartered Surveyors found. RICS
said that the June house price rise was the fastest in just over 2 years. GBPEUR: 1.4530


EUROPEAN DATA:

• 10:00 EZ May Foreign Trade

• The euro area trade balance registered a EUR1.99bn non-seasonally adjusted deficit in April.

The rolling 12-month surplus shrank to just EUR1.708bn, its smallest level since June 2001. This
has largely been a result of more expensive imports.

• Business expectations in the IFO survey bounced back in June, so the market expects to see
some stabilisation in the ZEW survey this month. The football World Cup may also have boosted
sentiment unless analysts perceive that its short-term boost to growth will quickly dissipate.

EURUSD: 1.2537


US DATA:

• 13:30 US PPI (Jun) % month on month

• The PPI rose by 0.2% in May, as energy prices were little changed for once. Meanwhile, the core
component rose by 0.3% after back-to-back 0.1% advances, as wholesale prices for
pharmaceuticals jumped by 1.9%.

• The latter two reports will shape the day's trend, especially if the core PPI slows down to 0.2%
from 0.3% and the TICS report meets our forecast of $35 bln, from April's dismal $46.7 bln. A
soft core PPI reading will raise speculation that Wednesday's core CPI release of the will also
come in below 0.3%, thus reducing expectations of an August Fed hike. Such an occurrence
would serve as a significant counterweight to the dollar's current safe haven-driven gains. Core
PPI: Jun EST +0.2% vs prev. +0.3% (cons +0.2%)

• Federal Reserve Governor Warsh speaks at American Enterprise Institute GBPUSD: 1.8215

Debbie regularly writes articles on the euro
pounds currency markets and 

Spanish property in Costa Del Sol  markets