• 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.

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

A US Treasury official says they have serious concerns about Chinese forex policy and are reviewing the the Senate bill which seeks a WTO case with Chinese concessions.

The rebound in the Chinese economy and continued large accumulation of forex reserves shows China should resume CNY appreciation. China should move to a more market-oriented exchange rate, the official says.

EUR/USD is losing ground ahead of the Fed, in no small part on the uptick in trade tensions. Risk aversion is a theme that will likely accompany trade disputes.  EUR/USD trades at 1.3730.

The decade-long struggle to replace the US’s fleet of airborne refueling tankers is turning ugly as France and Germany claim that Airbus is being unfairly discriminated against in the deal…Both Boeing and EADS have at various times looked like they had the inside track for the contract. EADS promised to build a US plant as part of its partnership with Northrup Grumman. This is one of the longest running sagas in the history of the military-industrial complex and looks like it is still years away from being settled…

In lousy economic times, trade tensions become magnified, as we have seen…If these trade spats flare up further, look for risk aversion to be a theme ahead.

Republican Senator Brownback says he sees strong bipartisan support for a bill aimed at China’s currency regime…

Careful, lads. The Chinese don’t like to be bullied…You get more flies with honey than vinegar, the old saying goes…

The Schumer/Graham bill aimed at getting China to revalue the Yuan is beginning to take shape. Here’s the outline:

• Treasury would be required to identify countries with fundamentally misaligned currencies
• Report to Congress twice per year on misaligned currencies
• Country gets 90 days to take steps to begin correcting currency misalignment
• anti-dumping duties if steps not taken
• 360 days to correct misalignment before case brought before WTO.

• German government spokesman: Government expects no decision on aid for Greece at EU summit next week
• German government source (anonymous, not spokesman): Should Greece aid be needed, German government is open to involvement of IMF
• German FinMin: Euro zone states would take coordinated action if one state in group faced bankruptcy
• Greek FinMin: Welcomes eurogroups decision on Greek aid.  Aid to be granted to Greece only should need arise. Will be granted on reasonable rates
• Swiss government raises 2010 GDP growth forecast to 1.4% from previous forecast of 0.7%
• Shanghai share index closes up 0.5%
• UK Treasury Chief Sec Byrne: EU has got judgement wrong over deficit
• Belgian FinMin: Belgium ready to participate in any Greek aid scheme. Aid scheme could involve bilateral loans or guarantees
• Euro zone February inflation confirmed at +0.3% m/m, +0.9% y/y
• ZEW March German economic sentiment index 44.5 vs 45.1 in February, better than expected 43.7

Well looks from all the rhetoric as though Greece is going to get its aid, if infact it needs it.  Can’t really fathom the details. Maybe its just me being slow. or maybe there aren’t any.

EUR/USD up at 1.3720 from early 1.3695. Early sell-off reached session low 1.3657 where sovereign purchases supported.  Slightly better than expected ZEW data (see above) also helped.   

Cable started around 1.5005 and fell to 1.4979, two  UK clearers and a German bank notable sellers.  Sovereign buy orders were tipped down at 1.4950/60 but we didn’t get that far. Sovereign buying is said to have surfaced around the lows.  Stops were tripped as we went through overnight high of 1.5071 on way to session high 1.5153, presently at 1.5140.  Another clearer (neither of those seen selling earlier) is said to have played a big part in getting the pairing through 1.5100.

Latest poll in Daily express shows Tories lead increasing. Maybe we might not get hung parliament after all.  Fingers crossed.

EUR/GBP down at .9062 from early .9095.  An early rally floundered at .9119.  The .9110/30 zone continues to provide formidable resistance.

USD/JPY up at 90.65 from early 90.10.  We’re stuck 90.00-91.00 range at the moment.  Fiscal year end repatriation flows capping the upside. Speculation BOJ will bring in further easing measures this week limiting downside.

The White House says the US relationship with China is in good shape but there are some differences. They would not describe the relationship as “tense”.

Oh yeah, the relationship is terrific, why do you ask?

Sounds like one of those Washington tickle fights…

Reuters reports that 130 members of Congress have asked Treasury and Commerce to label China a currency manipulator when the Treasury issues its semi-annual currency report on April 15. They want countervailing duties applied to Chinese imports. Treasury should enter into negotiations with China on its currency regime with the IMF and others after labeling it a manipulator. If talks fail, Obama should take China to the WTO, the lawmakers say.

Trade wars are a bad, bad thing…Over the medium-term, it suggests shades of the Great Depression. This growing spat certainly argues for risk aversion…

• German government spokesman:  No political decisions to be made on Monday on euro zone aid for Greece.  Not talking about possible financing for any EMF.  Greece has not asked for aid, is working on its debt problems itself
• Japan MOF’s Noda: Hopes BOJ will take appropriate policy steps in view of economic situation
• Japan government upgrades economic assessment for first time since July 2009. Economy has been steadily picking up. Raises assessment on personal consumption, capex
• Shanghai share index down 1.2%, lowest close in 5 weeks
• Swiss February producer/import prices -0.3% m/m, -1.0% y/y
• Euro zone Q4 2009 employment -0.2% q/q, -2.0% y/y
• Japan FinMin Kan:  Yen relatively stable now. Concerns remain that euro’s woes could effect yen
• BOE’s Barker: Possible Uk may have a quarter when GDP falls, but no double dip. Recovery will be bumpy, fragile

Bad morning for sterling, cable down at 1.5045 from early 1.5160, while EUR/GBP is up at .9118 from early .9060.  The move comes with worries over a hung parliament exacerabated by weekend polls; warning from Moody’s re Uk’s AAA rating; downbeat comments from BOE’s Barker; and poor UK housing data from Rightmove,  the +0.1% m/m rise in March being the lowest recorded for the month.

Cable, and sterling in general, started out on the front foot however, cable fleetingly above 1.5200, EUR/GBP down to .9047.  Given the raft of poor news the move was a little baffling and sources cited decent cable buying from Eastern Europe.  Some also seemed to take solace in the Moody’s comments, but I couldn’t quite see that myself.

Talk UK clearer was an aggressive cable seller during the session, mutterings it was tied to Prudential’s purchase of AIA.

EUR/USD little easier, but not by much.  EUR/USD sits at 1.3724 having been as low as 1.3699 after stops tripped through 1.3720.  Comments from German spokesman and others re Greek aid have been duly noted (see above).  Talk of sovereign sell interest up at 1.3800 and again up at 1.3830/50 will be adding note of caution to euro bulls.

USD/JPY very marginally firmer, up at 90.70 from early 90.57.  The pairing remains fairly well underpinned ahead of  BOJ’s meeting later in the week.  Sell orders seen 90.80/00, stops just above there.

EUR/CHF has continued lower, presently down at 1.4533 from early 1.4560 as the SNB stays at home.

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