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.

The late fall on Wall Street is adversely affecting Asian bourses, the Nikkei is 0.75% lower on the open and the Kospi is 0.15% lower.

European shares have turned higher with about 30 minutes to go in the session and the currency has followed suit. Commodities are firmer as well with the CRB index up about 1% on the day.

EUR/USD trades in the low 1.3690s. 1.3715 is resistance on further strength.

• 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

The Nikkei is -0.5%, the Kospi is -0.4% but both HK and Shanghai exchanges are relatively flat. Gold has rallied 1.25%, copper is 2% higher after big falls last week and oil is also a little higher, 0.25%.

UK and German markets each closed down 1.5% today but France fell 3.1%. What’s up with that?

Oil prices are heavy again today, despite a Goldman buy recommendation. It trades now below the $72 level, down another $1.35. Gold is within $3.50 of session lows, now at $1055. China and India have been rumored bidders at $1050, so a break would suggest another leg lower.

The major indexes in Europe ended between 2.2 and 2.6% on the day. Dpain? Down 6.1% lower on the day. Ouch.

EUR/USD trades at session lows of 1.3758.

US shares are 2.0% lower, at writing.

• IMF Chief Strauss Kahn: Governments need to spell out how they will reduce their debt
• Shanghai share index down 0.3%
• Swiss trade balance +1360 mln in December
• Spain’s Economy Minister Salgado: No risk to euro zone.  Spain’s situation is very different to Greece’s
• Chinese Foreign Min: Chnia continuing to look at fx rate, we think it is at reasonable and fair level
• China Commerce Min: Will take shoe tariff dispute with EU to WTO
• EU says measures against China shoes taken on clear evidence of harmful dumping of Chinese products. It’s not about protectionism
• UK Halifax house price index +0.6% m/m, +3.6% in 3months to January vs yr ago, as expected
• German December manufacturing orders -2.3% m/m, much weaker than median forecast of +0.2%
• German Econ min: Recovery lost momentum after Q3 2009
• Bank of England leave rates unchanged, pauses QE

JPY and USD firmer on morning against backdrop of poor risk sentiment. European stocks lower, oil off close to 3/4’s of a buck, gold close to session low.

EUR/USD started around 1.3890 and was soon on the defensive. We did a little song and dance just ahead of well touted 1.3850 barrier option interest, but we didn’t have to wait too long for it to give way. Concerns regarding Greek, Portuguese, and to some extent Spanish budget deficits remain very much to the fore.

We got as low as 1.3827 before BIS buying helped partial recovery, presently at 1.3847. Barrier option interest now well noted at 1.3800.

Cable started around 1.5905 and came under early pressure. We got down to 1.5850/60 area and we did a little song and dance here as well, just ahead of touted 1.5850 barrier option interest. Eventually though 1.5850 gave out and we managed a session low 1.5806 session low just ahead of BOE announcement. The pairing stood around 1.5825 as the announcement came out and saw a subsequent relief rally when Bank left rates on hold and paused QE. 

USD/JPY sits at 90.80, little changed on day with yen seeing decent cross gains against the backdrop of heightened risk aversion. EUR/JPY is down at 125.75 from early 126.25. USD/JPY buy orders tipped at 90.50 and then 90.00/20. Japanese exporters seen up at 91.10/30.

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EUR/USD sits at 1.3890, hardly budged from where North America closed out Wednesday, with Asian trade confined to an uninspired 1.3868-1.3903 range.  Strong concerns surrounding the budget deficits of countries like Greece, Portugal and Spain remain, and are unlikely to go away anytime soon. They are negating any lasting recovery in EUR/USD at the present time.

Next level of interest on downside is 1.3850, where option barrier interest is tipped. A robust defence of said level is expected to continue. Stops will be gathering just below.  We’ve seen the BIS buying EUR/USD in recent sessions and more of the same is anticipated.

Euro zone data today:

11:00 GMT: German factory orders for December, expected +0.2% m/m, +9.6% y/y

12:45 GMT:  ECB rate decision.

Extremely hard to see ECB doing anything more than sit on their hands given current situation in likes of Greece and Portugal.

European stocks to open very marginally firmer.

HK has given up a lot of the 2% gains it posted yesterday, now down just over 1.5%. The Nikkei is over 0.5% lower, with Toyota the main drag there. Shanghai and Sydney are 0.5% and 0.8% lower respectively and the Kospi has lost the least, currently 0.25% lower. Gold is steady around $1110/oz.

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