Given latest developments sterling is showing some resilience.  Latest weekend opinion polls continue to suggest at hung parliament being the most likely outcome of the general election, while UK rightmove house price data for March didn’t make very palatable reading.  The 0.1% m/m rise was the lowest ever recorded in March and backs up recent data suggesting the UK housing market could be in for a tough time as the year progresses.

Elsewhere Moodys rating agency has come out warning on Uk’s AAA rating.

Will be interesting to see whether this resilience lasts as European trading gets underway.

The move comes amid ongoing speculation China is close to implementing further steps to rein in growth, which is weighing on Asian stocks. Morgan Stanley expects “multiple” increases in bank reserve ratio requirements and higher interest rates, starting as early as next month.

Elsewhere Sunday’s Irish Times carries comments by EU spokesman, saying euro zone has not agreed a financial support package for Greece, but that technical work is ongoing.

Very little in way of euro zone data today:

10:00 GMT: Euro zone unemployment Q4

Tail end of last week there were reports of sovereign sell interest lying around 1.3800 and these reports have been supplemented by talk of further sell interest up in the 1.3830/50 zone.

US banks have been rebuilding their capital by borrowing from the Fed at near zero and buying US Treasuries (lending to the government) further out the yield curve, profiting from the higher yield on the longer-term bonds. So long as they hold the bonds to maturity and the US does not default on its debts, the trade is essentially risk free.

In Europe, big banks have been playing a riskier game. Since European government bonds come in 16 different flavors, they’ve been passing up vanilla high-quality German bunds for tootie fruity lower-quality Greek bonds. In times of low stress, this is a more profitable strategy than merely buying the German benchmarks. In times of stress, it is a sure loser.

The result? Big European banks have been buying credit default swaps to protect their positions. Greek bond prices have plummeted as CDS traders hedge their positions. In other words, a vicious spiral. Rather than blame hedge funds, European leaders should look no further than their leading banks.

Until there is a unified European bond market, this risk will persist as banks invest in “safe” government debt hoping for a political rescue if the bets go bad. Sounds like sub-prime all over again…

It is hard to imagine, but the EU economics commissioner is speculating on the impact on the EU of a collapse in Greece.

Never speculate, Olli. Speculators are evil…

Repeat after me…never believe anything until it has been officially denied…

The EU commission says Greek GDP will fall 2.25% this year due to austerity.

EUR/USD is jittery around 1.3750 as dollar strength from the data is offset by buying of EUR crosses like EUR/JPY. EUR/JPY has stalled ahead of key 125.23 and USD/JPY is holding below 91.00, where large offers have been seen.

The USD has seen some across the board slippage. Some have cited reports Janet Yellen is Obama’s pick for Fed  vice chairperson as one of the reasons for this bout of weakness. She is a noted monetary dove. In her most recent speech she said the economy will operate below potential this year and next and still needs low interest rates saying “This is not the time to be tightening.” Oh well it’s a reason of sorts I guess.

EUR/USD presently at 1.3765 having started out around 1.3695 and has been as high as 1.3796.   Asian sovereign buying seen early.  We got to around 1.3725/30 where Russia was a notable seller stalling the rally. But not for long.  We were soon through touted sell orders at 1.3730/50, tripping stops just above and making it to just shy of 1.3800 where sovereign sell orders had been cited earlier in the day.

Traders were quick to note a US investment bank putting out a long EUR/USD recommendaton, target 1.4500, stop 1.3500.  The release of demonstrably stronger than expected euro zone industrial output data certainly helped provide underpinning.

Cable up at 1.5155 from early 1.5065, but slightly off session high 1.5172.  Asian sovereign seen buying early.  Market noted the Angus Reid poll showing Tories extending poll lead out to 13 points.  The pairing did swoon when comments from BOE’s Dale hit the wires, the MPC member opining that the QE pause doesn’t mean it has come to an end. We went quickly from around 1.5155 to 1.5135 before recovering just as quickly.

USD/JPY down at 90.45 from early 90.60 having been as low as 90.18 at one stage.

EUR/CHF down on the day. Started around 1.4618 and fell quickly.  It made it all the way to 1.4581 with a Swiss commercial bank a notable seller managing to run through reported  SNB bids in the 1.4590/95 area.  We’re presently at 4588.

USD/CAD sharply lower, down at  session low 1.0157 from early 1.0235, with decent stops tripped on move through 1.0200.  Move coincided with release of latest Canadian jobs data.

Article by AEP in The Telegraph entitled “Europe’s banks brace for UK debt crisis” will have been duly noted, but to be honest it offers nothing new at all.

No major data releases today.

Sell orders tipped at 1.5090/00, stops through 1.5105.

Interesting to note a couple of UK clearers have been sellers of the EUR/GBP cross up around .9110/20 in past two sessions. Guess not everyone is so down on poor old sterling.

• Household net worth rose $700 bln in Q4 to $54.2 bln
• Household debt contracted at a 1.2% annual rate, the seventh consecutive decline
• Home mortgage debt fell at a 0.8% annual rate
• nonfinancial business debt fell at a 3.2%  annual rate
• US Federal debt rose at a 12.6% annual rate

Bottom line: Private deleveraging continues while public debt continues to expand at a rapid rate.

That’s a bit of a change of heart for the French president who was anything but shy about talking down the euro when it was near the 1.50 level. Greece’s near-death experience appears to have opened his eyes to the risks of a collapse in currency rates…

This area in the mid-1.30s is pretty neutral territory. Hard to see any of the central banks being upset with present EUR/USD exchange rates…

EUR/USD is ignoring the comments, trading at 1.3655.

Sterling has had a decent morning, cable up at 1.5045 from early 1.4985, while EUR/GBP is down at .9075 from around .9105.

Can’t see that there was particularly any new news.  Cable dipped early to session low 1.4948 before bouncing. Reports soon circulated that a US custody bank was in buying and we were off to the races.  Stops tripped on move above 1.5000 and again through 1.5030 and 1.5040 on way to session high 1.5062 before settling back.

A UK clearer was a notable seller of the EUR/GBP cross early. It was a different clearer to the one seen selling up above .9100 yesterday and a different one from the one recently noted buying 6month 1.4400 cable puts. The second part makes sense, I guess. Stops were tripped through .9090 on way to session low .9062 before slight recovery.

EUR/USD sits at 1.3655, very little changed on the day.  The pairing has seen price action confined to a narrow range with no clear direction evident.  Talk of buy orders down at 1.3600/20, small stops below.  On topside, sell orders layered from 1.3670 up to 1.3705.

USD/JPY little firmer at 90.65 from early 90.35, with yen weak on the crosses. This comes despite talk of ongoing fiscal year end repatriation flows and worries China is about to hike rates/withdraw stimulus (which could cause risk aversion to spike.) Seems alot of focus on next weeks BOJ meet on March 16/17 and possibility of further monetary policy easing.