The Pound remained at elevated levels against most of the majors yesterday as Tuesday’s sturdy second quarter UK GDP report continued to bolster demand. Sterling also garnered support following the release of mortgage data yesterday showing that loans for house purchases increased by the most in almost seven years in June. The 66,582 surge in mortgage approvals reflects renewed confidence in the housing market following the Conservative’s election victory in May, which prevented Labour laying out new measures to tax big spend house purchases.

Other than the GfK consumer confidence figure, there are no more significant British ecostats due for release this week, which means that Sterling sentiment will likely be driven by wider market trends or by any surprise remarks from Bank of England officials on the timing of the first UK rate hike since 2007.

Euro

The Pound rallied by just under half a cent against the Euro yesterday as Greek PM Alexis Tsipras threatened early elections if radical members of his left-wing Syriza party rebelled against the government’s decision to embark on harsh austerity measures in exchange for much-needed financial aid. Tsipras also stated that the Hellenic Republic would receive debt relief in November, if the proposed bailout package is secured as planned.

IMF Chief Christine Lagarde waded in with remarks suggesting that debt relief was, indeed, very much part of the Fund’s plans going forward. Lagarde suggested the IMF would not sign up to a programme that did not include ‘significant debt restructuring’ but vowed to respond only to actions rather than words – ‘deeds, not creeds’ – which appeared to be a thinly-veiled comment on the wider world’s distrust towards the Greek government.

Meanwhile, former Greek finance minister Yanis Varoufakis faced spurious charges of ‘high treason’ for leading his government down an idealistic path that actually hindered the nation’s negotiating position and, perhaps more credible, charges of running a criminal organisation, relating to his plan to create a parallel banking system using hacked tax codes.

Data later today is predicted to show that German consumer prices remained weak – albeit better than Britain’s 0.0% – at 0.3% in July. However, the data is unlikely to have a strong impact on GBP/EUR trading.

US Dollar

‘Cable’ strengthened by around a quarter of a cent yesterday in reaction to the latest policy announcement from the Federal Reserve. The world’s most important central bank left rates on hold at 0.25% but suggested that interest rates would rise at some point this year. The statement hurt the ‘Greenback’ because it was not seen to put in enough groundwork to prepare markets for a rate rise this September. Subsequently rate hike bets were pushed forward slightly to reflect the growing opinion that the Fed might wait until December to begin its tightening cycle.

All in all the modifications to the Fed statement were not seen as sufficient enough to warrant a hawkish view, which in turn was seen as a dovish signal. The ‘Greenback’ could rally if we are treated to a bumper second quarter US GDP report this afternoon. However, if the growth figures undershoot estimates of 2.5% we could see Sterling surge against the US Dollar as September Fed rate hike bets collapse completely.