• China to buy about 6 bln euros in Spanish debt – El Pais
  • China Commerce Ministry: China has been increasing holdings of euro debt, including Spain. Confident that European countries, including Spain, can overcome crisis
  • UK December services PMI 49.7 vs 53.0 in November, much weaker than median forecast of unchanged 53.0. Lowest read since April 2009
  • Euro zone economic sentiment 106.2 in December, stronger than median forecast of 105.5
  • Euro zone November retail sales -0.8% m/m, +0.1% y/y, much weaker than median forecasts +0.3%, +2.15% respectively
  • German November manufacturing orders +5.2% m/m, much stronger than median forecast of +0.9%. Strong demand from outside euro zone drove increase. Manufacturing orders from euro zone fell -1.4% m/m
  • Swiss December CPI flat m/m, +0.5% y/y vs median forecasts -0.1%, +0.4% respectively
  • France’s Fillon: European debt crisis is not a crisis of the euro, which remains a strong currency
  • UK’s Osborne: Challenge to Europe is to prove to the world that we can put our house in order
  • EU plans for bondholder haircuts unsettles debt markets – AEP at The Telegraph
  • UK rate hike could jolt investors – WSJ

When all said and done peeps, not a whole lot of net change this morning. EUR/USD sits at 1.3115, down from early 1.3140. UK clearer notable buyer in very early trade, but was temporary relief. Not long before barrier option interest at 1.3125 and 1.3100 brushed aside. We got as low as 1.3091 before muted recovery.

Hedge fund selling had been noted overnight in Asia and they were active selling again during the European session. Talk of buy orders from 1.3080 down to 1.3050. Also talk of decent buying of 1.3050 overnight puts, so some folk obviously feel those buy orders won’t stop the rot.

Cable at 1.5485, down from early 1.5510. It all started out so well, cable rallying to session high 1.5561. The market had noted the WSJ article (see above) raising the possibility of an early UK rate hike. Hedge fund selling was seen early in the EUR/GBP cross, which sold off from .8470 to session low .8433 as stops tripped through .8450.

Then in the blink of an eye it was all change. The weather-effected December services PMI (see above) was much weaker than expected. Cable stood around 1.5550 post release and quickly gave ground on the release. Slumped below 1.5500 and hasn’t managed to recover back above as yet. The EUR/GBP cross is back up where it started at .8470.

USD/JPY little changed at 83.15 from early 83.20. Inbetween notable selling from a major Japanese bank saw a dip to 82.89 session low before recovery.