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Hedge funds were reportedly large sellers of EUR/CHF throughout the European session yesterday. The German constitutional court decision next Wednesday is the big looming risk event and with pressure piling onto European banks, the safe bet seems to be to sell EUR/CHF. I still don’t understand why anyone would want to buy CHF if they think a banking crisis is about to happen anywhere, but that’s just me I guess.

All my screens are currently gone haywire so I can’t tell you the exact time yet, but it should introduce a bit of volatility to proceedings.

Back online thankfully; the Chinese PMI data in due at 01:00 GMT

• Sell orders, reportedly heavy, 1.0715/30
• Stops directly above 1.0735
• More decent offers 1.0780/00
• Light bids 1.0670

TOKYO (MNI) – Eurozone authorities are at odds with International
Monetary Fund staff that have circulated estimates showing serious
damage to European banks’ balance sheets from their holdings of troubled
eurozone sovereign debt, the Financial Times said late on Wednesday.

The analysis, which has been discussed by the IMF’s executive
board, has been rebutted by the European Central Bank and eurozone
governments, which said it is partial and misleading, the paper said.

The IMF’s work, contained in a draft version of its regular Global
Financial Stability Report (GFSR), uses credit default swap prices to
estimate the market value of government bonds of the three eurozone
countries receiving IMF bailouts — Ireland, Greece and Portugal —
together with those of Italy, Spain and Belgium.

Officials involved in the debate say the mark-to-market analysis
can explain much of the recent fall in European commercial banks’ share
prices, including French and German institutions that have large
holdings of eurozone sovereign debt.

The fund’s executive board, on which European countries hold around
a third of the votes, was due to discuss the draft report on Wednesday
afternoon in Washington.

The final version will be published in three weeks’ time just
before the IMF’s annual meetings, and is subject to revision depending
on the debate between fund staff and the board.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

[TOPICS: M$X$$$,M$$EC$,MGX$$$,M$$CR$]

LONDON (MNI) – The British Chambers of Commerce has joined the
flood of forecasters lowering their UK growth projections, cutting its
forecast for growth this year to 1.1% from a previous estimate of 1.3%.

In its latest set of economic forecasts, the BCC also cuts its
forecast for 2012 growth to 2.1% from a previous 2.2% estimate but says
that it expects prospects for growth to improve in coming years and
predicts that 2013 growth will exceed next year’s.

The BCC’s prediction for 2011 UK growth is below the average 1.3%
in the Treasury’s latest survey of independent forecasters. The Bank of
England’s Monetary Policy Committee is more optimistic, with an implied
1.7% 2011 growth forecast in its August Inflation Report

The BCC says that a new recession will be avoided despite ongoing
fiscal austerity and the turndown in global growth prospects, although
it says that these factors will likely weigh on activity in the
future.

The BCC said ‘special factors’ such as adverse weather effects and
the extended holidays around the Royal Wedding weekend had dragged
on growth in Q2 and weighed on its forecasts.

Unemployment forecasts have been increased – the BCC predicts that
it will rise to 8.2% of the workforce in Q4 2012 (2.6 million), from
7.9% of the workforce (approximately 2.5 million) in April-June this
year.

The BCC said that the “key reason for predicting a higher peak in
unemployment is slower growth, reinforced by the harsher impact of the
fiscal austerity plan.”

Lower growth in the UK and globally mean interest rates will be
kept low for longer than previously thought, the BCC says. It predicts
interest rates in the UK will begin rising in August 2012 and reach
1% in Q4 2012 and then 2.25% by Q4 2013.

If the economy continues to look weak, the BCC expects the MPC will
look to relaunch quantitative easing, increasing its stock of asset
purchases from the present stg200 billion to stg250bn.

The BCC concludes that many UK growth forecasts have “overstated
the ability of the economy to grow relatively rapidly in the recovery”.

“This excessive optimism is one of the reasons for the current
gloom,” the BCC adds.

–London newsroom: 00 44 20 7862 7492; email: sanjukta.moorthy@ntkn.com

[TOPICS: MABDS$,M$B$$$]

You know the rules, click on the link and put your guess in the comments section, ensuring that it hasn’t already been taken.

–Retransmitting Story Published 12:12 ET Wednesday
–Canada’s Economy Goes Marginally Negative in Q2
–Domestic Economy Strong But Dragged Down By Weak Exports
–Analysts See Q3 and Second Half Recovery

By Courtney Tower

OTTAWA (MNI) – Canada’s economy went marginally negative in the
second quarter this year, for the first quarter since the 2008-2009
recession, while analysts and Finance Minister Jim Flaherty said the
domestic economy remained strong but weak exports were the culprit.

Gross domestic product declined 0.1% in the second quarter,
following a 0.9% increase in the first quarter. GDP fell at an
annualized rate of 0.4% in the quarter, following a 3.6% gain in the
first quarter. The result reflected weakness in U.S. and European demand
for Canada’s exports, which suffered an 8.3% annualized decline in the
quarter and shaved off a large 5.7 percentage points from the quarter’s
growth rate.

Imports, instead, benefitting from the strong Canadian dollar where
exports were hurt by it, rose by 10.0% on an annualized basis. The C$
boosted demand in Canada for foreign capital investment goods. Business
investment grew by 15.5%. Consumer spending posted a 1.6% annualized
gain. Final domestic demand rose at a strong 3.0% annualized rate in the
second quarter, following a 1.8% rise in the first quarter.

Statistics Canada in its GDP report highlighted the temporary
nature of many of the declines and analysts later said the June
month-over-month gain of 0.2%, ahead of market expectations, had set the
stage for a third quarter rebound. There were 0.2% gains in both
goods-producing and services-producing sectors.

Temporary factors cited included maintenance shutdowns and forest
fires tempering a low 0.7% increase in mining and oil and gas
extraction, and the Japanese supply disruptions dampening automobile
production. The shutdowns are over, the fires moderating. Transportation
and warehousing services fell 1.1%, which Statistics Canada attributed
to the now-settled Canada-wide postal strike.

According to analysts at Canada’s largest commercial bank, Royal
Bank of Canada, the current volatility in financial markets, because of
worries about the global economy, provides a downside risk to Canada’s
prospects. But RBC noted that the Bank of Canada seems “prepared to
maintain the (policy) overnight rate at its current highly
stimulative1.0% to mitigate these risks.”

“The low level of interest rates combined with a well-functioning
financial system means that financing for both households and businesses
will remain affordable and will be a key support to the economy
reaccelerating in the second half of the year,” Dawn Desjardins,
assistant chief economist at RBC, said.

Canadian exports will follow growth in the United States, Desjardin
said. And “the reversal of temporary factors and low interest rate
backdrop support our view that third quarter 2011 growth will prove much
stronger than the second quarter’s tepid pace.”

Diana Petramala, economist at TD Economics, saw new growth in the
second half but a rebound that “will not be robust.” She expected the
current financial turbulence “to weigh on business and consumer
confidence and pull some of the steam out of domestic spending.”
Although temporary factors are reversed and the improving labor market
helps support moderate household spending growth, U.S. and global growth
are down to “a crawl,” inhibiting Canadian growth “to a quarterly pace
of 1.5% over the next three quarters,” she said.

Petramala sees the Canadian economy growing by 2.4% on an average
annual basis in 2011, less than the Bank of Canada has expected, and
that, therefore, “the central bank is unlikely to resume with rate hikes
until above-trend Canadian economic growth is assured.”

Finance Minister Jim Flaherty, meanwhile, issued a statement
shortly after the Statistics Canada report came out, saying that “the
Canadian economy is still very fragile.” He said: “the global economic
recovery – especially in the U.S. and Europe – is fragile and growth
will be modest. ” However, “our domestic economy remains strong, with
consumption, and particularly business investment, continuing to
expand.”

** Market News International Ottawa **

[TOPICS: MAUDS$,M$C$$$]

–House Speaker Formally Invites President Obama To Address Congress
–Rep. Boehner Says Sept. 8 Speech By Obama Is Better Than Sept. 7
–Rep. Boehner: Wants To Work W/Obama To ‘Solve America’s Jobs Crisis’

By John Shaw

WASHINGTON (MNI) – House Speaker John Boehner sent a letter to
President Obama Tuesday inviting him to address a Joint Session of
Congress next Thursday, Sept. 8, rather than on Wednesday, Sept. 7, as
the president requested.

In a letter to Obama, the Speaker said Congress is eager to hear
the president’s views on creating a better environment for job
creation in the U.S.

This, he said, is the nation’s “most urgent priority.”

But Boehner said Obama’s request to speak before Congress on
Wednesday, Sept. 7, would cause complications because the House will
just be returning that day from its August recess and has evening votes
scheduled.

Boehner said a joint session the following day would be better
because there would be “no parliamentary or logistical impediments that
might detract from your comments.”

He added that he is willing to try to work with the administration
to “solve America’s jobs crisis.”

The Senate returns to session on Tuesday, Sept. 6, while the House
returns the following day. Congress has been out of legislative session
since early August.

Republican presidential candidates have a debate scheduled the
evening of Sept. 7 in Simi Valley, California.

** Market News International Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

We normally don’t see the bigger flows here in Asia, but we live in hope. The London fix is expected to be busy for the opening of Q3 and the flows are anticipated to be CHF negative in the main. I’m sure we’ll hear more as the day progresses.

The highlight of this morning’s economic calendar will be the Australian retail sales data. Turnover in the AUD was quite large overnight with heavy selling reported at the London Fix and more heavy selling reported above 1.0700. The fact that it hasn’t fallen at all says something about the recent change in sentiment.

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