Currencies are treading water this morning ahead of the EU Leaders Summit and while the latest U.S. economic reports were mixed, the outlook for Fed policy has not changed. According to S&P Case-Shiller, house prices continued to fall but at its slowest pace since 2010. This is good news for the housing market but a turnaround in the real estate sector is still in the distant future because lowering prices remains the only way for sellers to move inventory. Property values in 20 U.S. cities rose 0.67 percent between March and April but fell 1.9 percent year over year. Consumer confidence also dropped to its lowest level since January while the Richmond Fed manufacturing index hit an 8 month low. With a significant slowdown in job growth, contraction in consumer spending and Europe’s troubles continuing to make the headlines, it is no surprise that Americans have grown more pessimistic. The Conference Board’s report is also consistent with similar surveys conducted by Investors Business Daily and the University of Michigan.

Meanwhile a weak Spanish bond auction and the rise in the country’s ten year bond yields have prevented the EUR/USD from enjoying the same recovery as other currencies. In fact all of the major currencies are trading higher against the greenback with the exception of the euro and Swiss Franc. The President of the European Council released a paper today outlining the steps towards a greater economic and monetary union that will serve as the basis for discussion at this week’s EU leaders Summit. Van Rompuy calls for a deeper financial integration that covers budgets, economic policy and accountability, which is ambitious but without support from Germans, none of it can happen. European officials across the region acknowledge the lack of support for shared credit risk, which suggests they are trying to temper expectations ahead of the Summit.