EUR/USD sits at 1.3676, down from a North American close Wednesday up around 1.3735.  

Comments from Angela Merkel’s chief finance spokesman will have been noted, Michael Meister opining that Greece should turn to the IMF if it’s needs aid. Some see this as signalling a rift between Germany and other European Leaders. Oh-eh.

Eurozone data due today:

09:00 GMT: Italian trade for January expected 0.19 bln

09:00 GMT: Euro zone current account for January expected 2.9 bln

10:00 GMT: Euro zone trade balance for January expected 5.1 bln

But, if borrowing costs too high could seek other solutions.  We’ve been here before.

Papandreou has been meeting with European Commission President Barroso.

Barroso for his part says we shouldn’t speculate about timing of Greek aid.  Commission to propose reinforced EU economic policy cooperation next month. Greece hasn’t asked for help, but Commission actively working with member states to design aid mechanism for Greece.

• Merkel: Euro facing biggest challenge ever.  No alternative to Greek savings programme.  No country can be left alone in euro zone.  On Greece, nothing can be done that goes against national law. In future need entry in the treaty that would make it possible as a last resort to exclude a country from euro zone if conditions not fulfilled “again and again over the long-term”
• Shanghai share index up 1.9% after Fed leaves policy stance unchanged
• Russia moves rouble floating trading band to 34.15 vs basket after buying $700 mln. Russian FinMin Kudrin says current exchange rate is justified. Given current oil prices , rouble trend is appreciation. Russia moves second time to move band to 34.10 after buying another $700 mln
• IMF’s Strauss Kahn says a bit worried countries not working together enough on ending crisis
• UK February claimant count -32,300, better than median forecast +8,ooo, biggest fall since November 1997
• Bank of England voted 9-0 in favour of leaving rates at 0.5%, QE at £200 bln in March - Minutes

Good morning for sterling, cable up at 1.5345 from early 1.5225, while EUR/GBP is down at .8985 from early .9057.  The trigger for the sterling gains was the better than expected jobs report.  Cable buying by a US investment bank in the 1.5210/15 area contained early weakness.  The BIS came in buying in 1.5220/25 area minutes before the release of the jobs data. How opportune. 

After the release it was basically a moonshot all the way to 1.5380 as sterling shorts were horribly squeezed, before we settled back slightly.

EUR/USD started round 1.3785 which is basically where we sit at writing.  It didn’t take long for the euro bulls to take out barrier option interest touted up at 1.3800 and we got to session high 1.3817 before slipping back.   More sovereign sell orders tipped at 1.3825/50 with further barrier option interest said to lie at 1.3850.   

The pairing did come under some pressure mid morning, reaching session low 1.3761, weighed down by heavy EUR/GBP selling in wake of UK jobs report.  Merkel’s comments probably played a little part there as well.   BIS was seen buying in low 1.3780’s.

USD/JPY at 90.50, unchanged on day.  Reports Japan Post Bank has been buying the pairing today, probably tied to purchases of US treasuries.  We remain stuck in well-defined 90-91 range at the present time.

• No country can be left alone in eurozone
• No alternative to Greek saving programme
• On Greece, nothing can be done that goes against national law

Human nature matey, all busy looking out for their own interests.

• Recovery is multi-speed
• For many countries it is too early to begin exit strategies
• Better balance of global demand needed
• China and Germany should boost domestic demand
• Appreciation of yuan would help in global rebalancing
• Massive build up of reserves is is burden for financial system
• Global risks uncoordinated policies, distorted capital flows
• Quick deal needed in EU on financial regulation

EUR/USD sits at 1,3780, hardly changed from North American close Tuesday around 1.3770, Asian trade confined to uninspired 1.3764-1.3788 range.  So far protection of barrier option interest up at 1.3800 is capping recent rally. 

Euro zone data today is thin on the ground:

10:00 GMT: Euro zone labour costs Q4 expected 2.7% y/y

10:00 GMT: Euro zone construction output for January

10:05 GMT: Italian current account for January

Nothing there to really whet the appetite.

Article by AEP in The Telegraph will have been noted. Entitled “The proposed EU Greek bail-out cannot simply bypass German law.”

Above aforementioned 1.3800, sovereign sell interest tipped up at 1.3825/50.

The Treasury Secretary says he has not spoken with Schumer on Senate bill. He’s not concerned about a trade war with China, he says. He has not yet made the judgment whether China is a currency manipulator.

Greece’s deputy FinMin welcomes the S&P report which took Greece off ratings watch, affirming its BBB+ rating. The deputy expects similar moves from the other ratings agencies.

Also crossing the wires is news that the EU has delayed its hedge fund regulation decision, a victory for the hedge-fund heavy UK economy.

A joint statement from the Treasury, Office of Management and Budget and the Council of Economic Advisers says that the US economy has pulled out of an uncontrolled freefall to approximate stability. Job losses have slowed to a trickle but the unemployment rate is unlikely to decline this year. US unemployment is likely to remain elevated for some time but the average rate may be lower than forecast for 2010. Passage of pay-as-you go budgeting rules and a strengthening economy should lead to lower deficits of approximately 5% of GDP by mid-decade, the statement says.

The EU is kicking the can down the road, saying the Greek situation will be reviewed in mid-May. Proposals on tighter economic cooperation will be made in mid-April. Greece does not need financial assistance today, he says.

Greece has made a pretty convincing case that despite austerity it cannot service its debt at rates 300 bp higher than the European benchmark. The EU seems not to care…

EUR/USD is sick of the whole EU/Greek situation and trades at 1.3715. Sellers are eyed toward 1.3730.

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