The British Pound pared the overnight decline against the greenback and pushed back above 1.4800 as the economic docket reinforced an enhanced outlook for future growth, and conditions are likely to improve going forward as the economic recovery gathers pace. Meanwhile, former Bank of England member DeAnne Julius held a cautious outlook for the region and said that the U.K. could face a “period of disruption” as policy makers look to change regulation of the financial system, and encouraged the central bank to remain on “hold” for the time being during an interview with Bloomberg Television. Claims for unemployment benefits in the U.K. dropped 30.9K in May, which exceeded expectations for a 20.0K contraction, while the claimant count rate unexpectedly weakened for the second consecutive month, with the reading falling back to 4.6% from 4.7% in the previous month, which is the lowest reading since April 2009. At the same time, the gauge for unemployment utilizing the International Labour Organization’s methodology slipped to 7.9% during the three-months through April from 8.0% in the previous month, while average weekly earnings including bonuses expanded 4.2% during the same period, which fell short of projections for a 4.5% rise. As growth prospects improve, we may see a shift in the BoE’s economic assessment, but Governor Mervyn King is likely to maintain support for the real economy over the coming months as he aims to encourage a sustainable recovery in the region. The Euro halted the two-day rally and slipped to a low of 1.2352 during the overnight session following a shift in market sentiment, and the single-currency may continue to pare the advance from earlier this week as the uncertainties surrounding the debt crisis weighs on the exchange rate. Nevertheless, the European Central Bank announced that it would implement an additional 5% premium on Greek government debt used as collateral for central bank loans after Moody’s downgraded the country’s credit rating to junk bond status, while the Bundesbank expects capital requirements for commercial banks to “increase by multiples” as the Basel Committee on Banking Supervision aims to overhaul the financial industry. Nevertheless, the final CPI reading for the Euro-Zone showed inflation push higher for the third month in May as the annualized rate pushed to 1.6% from 1.5% in the previous month, while the core gauge for price growth held steady at 0.8% after falling back from 1.0% in March. As price pressures hold below the 2% target for inflation, the ECB is likely to maintain a dovish outlook for future policy and is expected to support the economy over the coming months as the governments operating under the single-currency aim to tighten fiscal policy and scale back on public spending. The greenback was modestly higher against most of its major counterparts, with the USD/JPY paring the two-day decline to reach a high of 91.81 during the overnight trade, and the reserve currency may continue to appreciate going into the North American trade as investors scale back their appetite for risk. Nevertheless, producer prices in the world’s largest economy is forecasted to slip 0.5% in May after contracting 0.1% in the previous month, with the annual rate anticipated to fall back to 4.9% from 5.5%, while the core PPI is projected to increase to 1.1% from 1.0% in April. At the same time, housing starts are expected to slip 3.7% during the same period to an annualized pace of 648K from 672K, while building permits are forecasted to increase 2.5% to 625K, and the slew of data could produce choppy price action in the exchange rate as investors weigh the outlook for future growth.

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