Profit-taking on the previous euro gains ended late Friday after the release of the greatly anticipated European banking stress tests. E.U. banks performed well with only 7 minor financial institutions failing the tests and needing to raise capital. The results calmed markets concerns that banks being forced to raise capital could put undue pressure on balance sheets and thus trigger a second round on bank bailouts. The Euro failed to rebound on the back of the test’s publication as analysts were underwhelmed by the results. Many felt the tests were not strict enough due to the fact that it assumed there would be no chance of sovereign defaults and thus did not show the financial sectors exposure to sovereign debt.

U.K. Hometrack housing data came out slightly weaker than previous, prices dropped y/y to 2% in Jul from 2.1% previously. Equity markets are trading higher this morning pushed higher by a relief rally in banking stocks and, despite the slightly weaker housing data, the Pound remains supported.

There is no local or European data scheduled for today and in the U.S. only new home sales figures are expected. Equity markets and confidence trading are likely to dictate market direction.