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    European Session – German “yes” vote to Greek bailout fails to lift euro as dollar continues to surge on strong housing data

    Greece’s bailout took another step forward after the German parliament backed the deal by 439 votes to 119. The number of lawmakers voting against it was far higher than in previous bailout votes. German Chancellor Angela Merkel had warned parliament before the vote that a disorderly Greek exit from the euro could lead to chaos. But the finance minister Wolgang Schaeuble refused to rule out a Grexit. He said that a voluntary departure would be better than the €86 billion bailout on offer as it would allow Greece to cut its debt. Meanwhile, IMF head Christine Lagarde continued to press for debt reduction in an interview, adding pressure on Eurozone leaders.

    Strong US housing data pushed the dollar above day’s highs. Housing starts rose by 9.8% on the month to 1174k in June, above estimates of 1106k and higher than May’s figure of 1069k, which was revised higher. Building permits were also higher, increasing by 7.4% to 1343k in June, versus forecast of 1150k. More housing data is expected next week with existing and new home sales figures due to be released.

    US June inflation data was in-line with consensus estimates. Annual CPI rose to 0.1% in June from 0% in May. The core rate was also within forecast, coming in at 1.8%, up slightly from May’s 1.7%. The underlying rise in inflation supports the Fed’s case that inflation is on track to move towards the 2% target and the stronger housing data is a further sign of US growth gaining traction.

    Manufacturing activity is still a weak spot however for the US economy. The University of Michigan confidence index fell to 93.3 in July’s preliminary reading from 96.1 in June. Expectations were that it would fall to 96.0. The data took some steam off the dollar’s rally.

    The euro briefly topped the 1.09 level against the dollar after the EU gave final approval for the €7 billion bridge loan but dropped to 1.0860 on the strong US data. The pound had earlier rallied to 1.5671 dollars but later tumbled to as low as 1.5552 dollars in late European trading before rebounding to around 1.5619. Sterling lost ground against the euro as the single currency advanced to 0.6988 before dropping back to 0.6950.

    The Canadian dollar got some support from better-than-expected inflation figures. June annual CPI was within forecast at 1% but core CPI was above estimates at 2.3%, versus expectations of 2.2%. The greenback had earlier peaked at a new 6-year high of 1.3007 against the loonie before easing to 1.2983.

    The improving risk sentiment towards Greece and China helped the aussie and kiwi limit their losses as both were close to hitting fresh six-year lows against the dollar. The aussie fell to 0.7377 against the greenback in late European trading, while the kiwi was lower at 0.6531. The dollar was less buoyant against the yen as it hovered around the 124 handle for much of the day.

    Crude oil prices were set to end the week lower, hitting 3-month lows of $50.23 per barrel.

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