UK and French navies to merge?

Reuters reports that the US Commerce Department has turned down a currency probe related to a trade case brought by US aluminum manufacturers against China.

That should anger many in Congress who have been pushing the Obama administration to more aggressively go after China for currency manipulation.

The EU is dying a slow and steady death, the author argues…

You have to hand it to Japan. For years, all their regional trading partners have manipulated their currencies to remain competitive with China while Japan has kept a hands-off policy toward the JPY. Looks like that policy may be coming to an end.

The BOJ may be forced to actively manage its currency along the lines of South Korea, Singapore, Taiwan, Malaysia, et al… That would lead to greater imbalances and a surge in the Japanese current account which will further distort US and European monetary policy as Japan looks to park the proceeds of its intervention into the capital markets of those economies.

Those global economic distortions are largely responsible for the mis-allocation of liquidity into every-riskier assets in order to try and generate meaningful returns in a low interest rate environment, setting the stage for another bubble and another crisis several hears hence.

• In some Western countries we need to get used to period of modest growth of 2-3%, perhaps modestly higher
• Asked if weakness in US econ data a cobncern says “sure”, cites Canada’s relaince on exports to US
• Ireland has “sold” bank plan, has led EU in courageous fiscal reform decisions
• Asked on S&P downgrade of Ireland, says he takes rating agency views with grain of salt (excellent!!!)
• Says “Not a big fan” of Moody’s, S&P, says rating agencies part of the problem that caused crisis

France takes the rotating helm of the EU in 2011 and President Sarkozy wants to use his time in the big chair to reshape the global financial landscape.

Tools are needed to limit excessive exchange rate volatility, though he says he is not talking of fixed rates (thank goodness for that!). China needs to be part of that discussion, he says.

The recent surge in wheat prices highlights the need for discuss commodity price volatility.

While you’re at it Nic, could you do something about airfares and cable TV rates? Thanks, dude.

Global commodity giant plays nice with Beijing after a series of dust-ups…

• Ruling Labor party set for narrow Australian election victory on Saturday – Latest poll
• ECRI US leading economic index fell to 120.8 in Aug 13 wk from revised 122.0 prior week
• US July oil demand up 3.8% or 701,000 bpd from year ago
• Mexico central bank leaves benchmark interest rate unchanged at 4.5%
• Sarkozy’s Office: France will meet or beat 2010 1.4% economic growth target
• Greek/German 10-year yield spread widens 15 bps on day to 870 bps, highest since May 10
• EU Commission: Greece on track to reach 2010 deficit target if it sticks to already made commitment to keep spending 4 bln euros below plan
• Belgian consumer sentiment rises to -4 in August vs -7 in July
• Italy’s Berlusconi confident would have more than 50% support if election were held soon. If confidence motion defeated in parliament, expects election by December

Very tame end to the week.

EUR/USD  finishes at 1.2710, basically spot on where it was when I clocked in.   Early pressure was met by real money purchases. And then when the pairing failed to sell off on accelerated US stockmarket losses, euro bears decided to take some profits.  Basically it was a none event.

USD/JPY marginally firmer at 85.70 from early 85.40.  Basically a bit of pre weekend short covering.  Some caution that Japanese authorities could soon come up with further fiscal stimulus and firmer US yields  lent support. 

That said, sell orders were noted at 85.80/00 and they easily curtailed the rally, session high being 85.85.

AUD ends up at .8923 from early .8875. Latest poll suggesting the government will win the election will have provided support.  Also of technical interest, the 100 dma at 8840 held the sell off.  Not surprisingly sources reported decent buy interest down at .8840/45.

Cable touch firmer at 1.5530 from early 1,5505.  25 pips in cable as we all know is no change.

Ya’ll have a very pleasant weekend now.  Catch ya on the flip side.

• Will add US products to list currently subject to tariffs
• Measures taken because no prompt US response to resolve dispute

“Neighbours everybody needs good neighbours,

With a little understanding, you can find the perfect blend.

Neighbours, should be there for one another,

That’s when good neighbours become good friends”

Boy, used to love that programme. Wonder if it’s still going.

EUR/USD up at 1.2800 from a North American close Friday down around 1.2755. 

Market has noted reports that China is turning bullish on Europe and Japan at the expense of the U.S.

Technical support, superbly highlighted by Sean at 1.2735/40, has held the down-side.  Stops noted just below there before buy orders clustered down at 1.2700/10. Further stops below there.

On topside sell orders at 1.2825/35, which are said to include sovereign interest, have just about help the upside. More sell orders clustered 1.2850/60, with buy stops probably positioned not far north of there although haven’t got confirmation of level/s.

Swiss private bank was again seen aggressive buyer of the pairing in Europe earlier today.

US data due today:

12;30 GMT: Empire manufacturing for August, expected 8.25 from previous 5.08

13:00 GMT: Net long term TIC flows for June. Total net TIC flows

14:00 GMT: NAHB housing market index for August, expected 15 from previous 14.

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