Inventories fell 0.8% in December, a downer for GDP. The market expected a 0.5% rise.

Also crossing the wires is the IDB/TIPP economic optimism index. It fell to 46.8 in Feb from 48.8 in Jan

• ECB spokesman: Trichet changing flight plans from Australia to Europe purely because of logistics. ECB President had accepted invite to Thursdays EU summit in mid-January
• German December trade surplus s.a. 16.7 bln vs 17.0 bln in November. Down but better than median forecast of 15.0 bln
• German final December CPI confirmed at -0.6% m/m, +0.8% y/y
• China January passenger car sales up over 100% y/y – Official data
• Greece considering raising average real retirement age to 63 from 61 by 2015.  Greek pension system to face funding problems by 2015 if no changes made
• UK December global goods trade balance -£7.278 bln vs -£6.798 bln in November, much worse than median forecast -£6.63 bln. Gap widest since January 2009
• EIB: Cannot take part in bailouts that involve budget deficits or balance of payments support.
• Hector Sants quits as CEO of UK Financial Services Authority (FSA)

When all said and done alot of huffing and puffing but not alot of change on the majors. 

We started the day, the market all a twitter at the news that Trichet had changed his flight plans and booked an early flight back to Europe from Australia to attend this Thursdays EU meet.  Speculation grew that a plan was going to be hatched to save Greece. Turns out the switch was purely logistical and Trichet had accepted an invite to the meeting back in mid-January.

EUR/USD started around 1.3695 and  rose early on the Trichet speculation. On the way higher Russia was a notable seller into strength (probably booking a little profit having recently been a notable buyer in the low 1.36’s.) 

Eventually we got to a session high 1.3746 where the BIS stepped in as a seller and that was the top in place. We were already slipping lower when the news that Trichet’s plane switch was purely logistical hit the wires.  EUR/USD skidded below 1.3700, but the stay there was brief and we’re back at 1.3725.

Talk has buy orders lined up at 1.3695 down through 1.3680. On the top side, conflicting talk. Some have stops through 1.3750, some through 1.3760.

Cable little lower on the morning, presently at 1.5585 from an early 1.5610. Started out well for the pairing as it rallied to session high 1.5646 where it ran into a brickwall.  Things were already turning sour when the release of particularly disappointing UK trade data increased the pressure, sending us to session low 1.5563 before some recovery.

USD/JPY has made some marginal ground, presently at 89.65 from early 89.40.  Talk of sell orders 89.90/00, stops through 90.10.  Buy orders 89.00/20, stops just below.

AUD/USD up at .8720 from early .8775.  Asian sovereign buying has helped support.

The European Investment Bank cannot take part in bailouts designed to help EU members weather budget deficit or balance of payments problems, the bank said in a statement today.

There had been speculation that the EIB, which is owned by EU governments, could be used in some way to help Greece tackle its debt and budgetary problems.

UK December global trade balance has come in at -£7.278 bln, demonstrably worse than median forecast of -£6.63 bln, and a deterioration from revised -£6.798 bln seen in November.

Trade gap widest since January 2009.

Data not helped sterling, cable back bel0w 1.5600 again, presently at 1.5585.

• Portuguese/German 10-year government bond yield spread tightens to 156 bps from 167 bps at Monday’s settlement
• Spanish/German 10-year government bond yield spread tightens to 94 bps from 101 bps at Monday’s settlement.

EUR/USD back up at 1.3740.  To say the market was skittish this morning would be an understatement.

• Greece considering raising average real retirement age to 63 from 61 by 2015.

Retirement age 61 at present!!!!  No wonder they got problems.

Cable trading a little firmer, presently at 1.5625.

 Overnight saw the release of UK RICS house price balance up at +32 from +30 in December.

Elsewhere, BRC same store sales fell -0.7% y/y in January, while total annual sales growth came in at 1.2% (the weakest January performance in 15 years) Without reading up on it would guess the crap weather might have had something to do with that.

Today we have UK trade for December at 09:30 GMT,  expected visible -6700; non EU -3100; total -2800.

EUR/USD is trading firmer this morning, up at 1.3710 from a North American close Monday around 1.3660.

News Trichet leaving central bankers meeting in Sydney day early to attend EU leaders meeting has the market in a bit of a tizzy, heightening speculation that a Greek rescue plan could be in the offing. Weekend media reports had EU President Herman van Rompuy “quietly hatching a plan” so this speculation is no surprise.

Euro zone data due today:

07:00 GMT: German trade balance for December expected 15.0 bln; current account 19.1 bln

07:00 GMT: German CPI for January (final) expected -0.6% m/m, +0.8% y/y

European stocks expected to open lower this morning.

Stops seen through 1.3720 and 1.3760.

• PIMCO’s El-Erian says prefers German government bonds over U.S. treasuries
• Swiss January unadj jobless rate 4.5% vs median forecast 4.6%.  Seasonally adjusted 4.1% vs median forecast 4.3%
• Bk of France January survey sees Q1 GDP at +0.5%.  Industry business sentiment index 104 vs revised 102 in December. Services business sentiment index 89 from 88
• Swiss retail sales 4.75 y/y in December
• Euro zone sentix index -8.2 in February vs -3.7 in January, worse than median forecast-2.3 and lowest read since last October
• China aims to keep inflation at about 3% this year. China may raise rates to fight asset bubble, control inflation – National Pension Chief

Messy Monday morning.

EUR/USD started around 1.3640 and has been up as high as 1.3713, presently at 1.3685.  I’d characterise this morning’s trade as highly nervy.  The picture regarding likes of Greece, Portugal and Spain remains pretty dire, but there is some evident caution at these lower levels. The market probably has one eye on the meeting of EU leaders this coming Thursday and the outside chance they may just pull a rabbit out of the hat.

Russia was a decent buyer, helping give the pairing it’s early upside impetus.

Cable has been all over the shop. Started around 1.5595 and fell sharply early, triggering stops through 1.5550 and reaching session low 1.5536. From  there we saw a murderous short squeeze, the pair rallying quickly to session high 1.5625. 

There was talk of an ACB seller lying in wait up at 1.5630/40, but we never got there.  UK clearer stepped in beforehand selling decent amounts and we’re presently down at 1.5580. 

USD/JPY SIT AT 89.40, unchanged on the day after narrow rangebound trade.

• M2 money supply will grow by about 17-20% this year
• Loans to stay relatively loose despite central bank adjustments
• China likely to gradually increase bank’s reserve requirements further
• May raise interest rates to fight asset bubble, control inflation
• Rate rise less likely in first half of 2010
• Financial risks and asset bubbles are all controllable

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