ForexLive European Morning Wrap: Risk sentiment poor, JPY, USD firm

• IMF Chief Strauss Kahn: Governments need to spell out how they will reduce their debt
• Shanghai share index down 0.3%
• Swiss trade balance +1360 mln in December
• Spain’s Economy Minister Salgado: No risk to euro zone.  Spain’s situation is very different to Greece’s
• Chinese Foreign Min: Chnia continuing to look at fx rate, we think it is at reasonable and fair level
• China Commerce Min: Will take shoe tariff dispute with EU to WTO
• EU says measures against China shoes taken on clear evidence of harmful dumping of Chinese products. It’s not about protectionism
• UK Halifax house price index +0.6% m/m, +3.6% in 3months to January vs yr ago, as expected
• German December manufacturing orders -2.3% m/m, much weaker than median forecast of +0.2%
• German Econ min: Recovery lost momentum after Q3 2009
• Bank of England leave rates unchanged, pauses QE

JPY and USD firmer on morning against backdrop of poor risk sentiment. European stocks lower, oil off close to 3/4’s of a buck, gold close to session low.

EUR/USD started around 1.3890 and was soon on the defensive. We did a little song and dance just ahead of well touted 1.3850 barrier option interest, but we didn’t have to wait too long for it to give way. Concerns regarding Greek, Portuguese, and to some extent Spanish budget deficits remain very much to the fore.

We got as low as 1.3827 before BIS buying helped partial recovery, presently at 1.3847. Barrier option interest now well noted at 1.3800.

Cable started around 1.5905 and came under early pressure. We got down to 1.5850/60 area and we did a little song and dance here as well, just ahead of touted 1.5850 barrier option interest. Eventually though 1.5850 gave out and we managed a session low 1.5806 session low just ahead of BOE announcement. The pairing stood around 1.5825 as the announcement came out and saw a subsequent relief rally when Bank left rates on hold and paused QE. 

USD/JPY sits at 90.80, little changed on day with yen seeing decent cross gains against the backdrop of heightened risk aversion. EUR/JPY is down at 125.75 from early 126.25. USD/JPY buy orders tipped at 90.50 and then 90.00/20. Japanese exporters seen up at 91.10/30.

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