But, if borrowing costs too high could seek other solutions.  We’ve been here before.

Papandreou has been meeting with European Commission President Barroso.

Barroso for his part says we shouldn’t speculate about timing of Greek aid.  Commission to propose reinforced EU economic policy cooperation next month. Greece hasn’t asked for help, but Commission actively working with member states to design aid mechanism for Greece.

• 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.

• No country can be left alone in eurozone
• No alternative to Greek saving programme
• On Greece, nothing can be done that goes against national law

As expected.

• Some MPC members thought upside CPi risks has risen, others felt balance of risks not much changed
• Increasingly likely CPI would remain well above 2% target over coming months
• If recent sterling fall persists, likely to put extra upward pressure on CPi in coming months
• Mixed picture on growth; surveys up in February but weather, tax changes would make data volatile
• Clear that output likely to remain well below capacity for an extended period
• Impaired bank sector, fiscal tightening, weaker trade prospects likely to be big constraints
• Scale, timing of impact of monetary stimulus remained highly uncertain
• Continue to expect significant spare capacity to bear down on CPI once shocks wear off
• Boost to net trade from sterling fall likely, timing unclear due to uncertain growth in export markets
• Risk of rise in public’s CPI expectations ove medium term, MPC will closely review this

Cable has been up as high as 1.5336 in wake of better than expected jobs report. Initial resistance from here 1.5340.

UK February jobless claims have come in at -32,500, much better than median forecast of +8,000. Biggest fall since November 1997. Claimant rate 4.9%, better than median forecast 5%.

Cable has put on quick half a cent, presently at 1.5275.

ILO jobless rate 3 months to January 7.8%, better than median forecast 7.9%

Around current levels. We sit at 1.5223 just ahead of UK jobs report, BOE minutes.

• Given current oil prices, rouble trend will be rouble appreciation

Meanwhile Russia Central Bank moves rouble floating trading band second time to 34.10 vs basket after buying another $700 mln.

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

Choppy trade so far in cable. We’ve seen overnight range extended out to 1.5210-1.5269.  Buying by a US investment house in the 1.5210/20 area has limited cable slippage, so far at least.

• Is not QE
• BOJ aims to support private demand by pushing down long-term rates
• Wants broad understanding of BOJ’s easy stance to boost economy
• Japan economy somewhat overshooting BOJ’s forecasts
• BOJ’s step aimed at ensuring economic, price recovery
• Will take time for prices to return to desireable level.  No miracle step that would lift prices
• Will examine effect, drawbacks of each step in guiding monetary policy
• BOJ policy alone cannot help beat deflation
• Split vote will not hurt BOJ credibility

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