- Source: Savings banks so far blocking WestLb rescue. Rescue hangs in the balance. BAFIN regulator present in talks for first time at high level
- We can’t pay this burden of bank debt, so let’s start talking default - Brendan O’Connor in the Irish Independent
- German govt spokesman: There is alot of support for franco-german competitiveness pact, expects compromise deal
- Euro zone December industrial prodcution -0.1% m/m, +8.0% y/y, in line with median forecasts flat, +8.1% respectively
- Portugal Q4 GDP -0.3% q/q, +1.2% y/y vs +0.3%, +1.4% in Q3
- Weber derails Merkel’s unity express - Irwin Stelzer in WSJ
- Vibrant exports will save Spain and perhaps the euro - AEP at The Telegraph (weird)
Not a very good morning for the euro, as worries over the Westlb rescue and Irish bank debt burden weigh. EUR/USD down at 1.3470 from early 1.3535 having been as low as 1.3450. Didn’t start out too badly with EUR/USD initially rallying to session high 1.3559.
An ACB was a notable seller around the highs and was quickly joined by two UK clearers selling aggressively. The sell-off accelerated sharply, when comments from a source indicated that negotiations surrounding Westlb rescue were in serious trouble.
Stops through 1.3490 were tripped on the way to session low 1.3450, before partial recovery. Stops now seen just below 1.3450.
Cable down at 1.6000 from early 1.6055. Here too things started ok. The pairing rallied early, underpinned by some decent buying of GBP/AUD out of the Middle East. But the early promise turned out to be false promise. Same ACB seen selling EUR/USD also clouted cable around the same time and the die was caste.
We dipped below 1.6000 on talk of sell interest lined up for the 11:00 GMT fix but so far there has been no real followthrough.
EUR/GBP down at .8415 from early .8430, reflecting the generally easier euro tone.
USD/CHF unchanged at .9720, swissy benefitting on the crosses from increased euro zone concerns. EUR/CHF down at 1.3095 from early 1.3165.
AUD/USD followed the general tone of a firmer dollar, down at 1.0015 from early 1.0050.
