• 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.

It has been an extremely quiet trading session in Asia today with the upcoming Chinese New Year having traders in holiday mode already.

• Trichet leaves Sydney 1 day early to attend ECB meeting
• UK house prices rise in January but activity drops off
• UK January retail sales worst in 15 years
• Suggestions rise that EU might ‘teach speculators a lesson“
• Professional market shows speculative short positions in EUR at record level suggesting hedge funds have increased their bets. Retail market looks to be evenly divided.
• Asian stockmarkets fairly flat despite late Wall Street fall
• Gold makes small gains

It is hard to put an interesting spin on what has been a very quiet session. The EUR was unsure what to do when reports emerged that JC Trichet had left Sydney 1 day early to attend an ECB meeting. Some saw it as a positive, the ECB was about to take some positive steps, others saw it as a negative, more panic meetings for the ECB. Movement was nevertheless confined to fairly tight ranges. The fact that regional stockmarkets have ignored the late fall on Wall Street and managed to finish fairly flat has helped the EUR amd EUR crosses to recover late in the session and finish on their highs. Ranges: EUR/USD 1.3644/94 and EUR/JPY 121.68/122.41.

The GBP was unaffected by conflicting economic data, strong house prices and weak retail sales figures. The market didn’t know what to do so it did nothing. Ranges: 1.5567/1.5618 in cable and .8757/71 in EUR/GBP.

AUD/USD fell to its session low of .8617 early in the day after the late fall on Wall Street but has since recovered as technical accounts continue to buy aead of the 200-day MA. Range: .8617/78.

USD/JPY range 89.17/50.

Markets: Nikkei -0.1%, HK +0.2%, Shanghai +0.2%, Kospi +0.5%. Gold +$2 at $1068/oz.

• Spanish deputy ecomin Campos: Not concerned about Greek contagion, a short-term factor; funding costs falling despite wider spreads
• Fed’s Bullard: Fed should sell assets before raising rates; sales could come later in 2010
• Fed’s Yellen: China stuck with US monetary policy until it ends currency peg
• US equities slide late in session; S&P 500 falls 0.9%; European shares closed up more than 1%; Down closes below 10,000 for first time since November
• US yields close essentially unchanged; 2-year notes at 0.77%, 10- year 3.57%
• Gold closes on session lows at $1063; oil rises 0.50 to $71.73

EUR/USD attempted to rally several times during the European and US sessions but repeatedly stalled at the 1.3715 level. The last stall came in early afternoon in New York and it prompted short-term spec accounts to unwind short-term long positions. A UK and a Swiss name were aggressive sellers as prices slid back below the 1.3700 level.

European banks remain heavily pressured due to exposures across the Club Med countries and bond spreads remain near their wides for the crisis in Spain, Portugal and to a lesser extent Greece.

AUD/USD attempted a rally again today but was unable to match Friday’s 0.8718 high and sold off heavily after that. It closes the day at 0.8645.

USD/JPY was rock steady during the US session with most of the day spent on the 89.30 handle.

Cable tried to reverse the big sell off seen in Asia overnight which carried through to London this morning. From 1.5535 lows we rallied as high as 1.5660 just ahead of the London close. We lost those gains in the afternoon as dollar strength resumed, pushing cable down to 1.5600 at the close. BRC retail sales data and RICS house price data will be an focus on Asia tonight.

• 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.

• G7 fails to end Greece concern
• Prius recall and Toyota apology helps share price to steady
• Australian government withdrawing bank guarantee scheme
• NZ home prices continue to rise
• Regional sharemarkets fall by 0.5% on average
• Commodity prices rally by around 2% after big falls last week

The first move of the week was up for the majors and the JPY crosses as the market interpreted the G7 statements regarding Greece to be moderately positive. EUR/USD rallied to a session high at 1.3715 in the interbank market. This mild positivity soon evaporated and EUR/JPY profit taking above 122.50 was heavy enough to put a cap on any further rallies. Ranges: EUR/USD 1.3622/1.3715, EUR/JPY 121.55/122.50.

Sterling has been under mild pressure throughout the day amid further negative reports on the state of UK finances. EUR/GBP made new short term highs at .8770 before falling back to the NY closing level at .8740. Cable found lots of willing sellers above 1.5650 this morning. Range: 1.5582/1.5652.

The AUD was expected to suffer moderately after the change to the government guarantee scheme but technical accounts have appeared as willing buyers after chart support and the 200-day MA around the .8570/75 level held firm on Friday night. Range: .8643/.8720.

USD/JPY has again been pushed around by the crosses in an 89.15/55 range.

Markets: Nikkei -0.5%, Kospi -0.8%, Shanghai -0.3%, HK -0.3%. Gold +1.25% at $1065/oz.

• US nonfarm payrolls fall 20,000 in January; unemployment rate unexpected falls to 9.7%; Benchmark revision slices 930,000 jobs from 2009 total.
• Canada adds 43,000 jobs in January
• UK’s Darling: BOE quantitative ease halt “sensible”
• Portugal passes regional finance law; Government defeated
• Trichet denies emergency ECB meeting this weekend over Greece.
• Spanish PM Zapatero vows EU will support Greece
• Fed’s Hoenig: Timing of rate hikes will depend on economy
• US consumer credit falls for 11th straight month but pace declines dramatically
• European shares close down 2.5/3.5%
• S&P reverses large loss intraday loss, ends modestly higher
• US 10-year note ends 7 bp lower at 3.53%
• Oil falls below $70 intraday, ends down $1.25 at $71.85
• Gold falls to $1044.75before reversing to end near highs at $1067

No lack of volatility on an employment Friday. The unemployment report was met with head scratching as the US continued to shed jobs but at the same time saw a solid fall in the unemployment rate. After about 45 minutes, the market turned its attention back to Europe and the euro began to spiral lower.

We reached a high of 1.3742 shortly after the report but before long we were headed lower as risk aversion spiked as contagion spread throughout the markets. The selling reached a crescendo shortly before Europe closed up shop. Oil led that leg lower as it tumbled briefly below $70. EUR/USD slipped as low as 1.3585 on EBS.

We recovered late in the afternoon, helped by weekend short-covering as well as a much improved US consumer credit report. US consumer paid down $1.7 bln in debt in December after paying down nearly $22 bln in November. We end the day around 1.3660.

USD/JPY reached 89.89 after the employment report but slipped as risk aversion returned at mid-morning in New York. We made a final push to the 88.82 level at mid-afternoon but bounced sharply from there. That level contained a dip yesterday afternoon and protected the 88.55 spike low set Thursday. Some posit that the BOJ or Kampo may be parked at that level to keep the JPY from garnering any further safe-haven strength. EUR/JPY fell to a trend low at 120.70 and ends around 122.15.

Cable broke to fresh trend lows at 1.5560 this afternoon but recovered as stocks and commodities reversed late. It ends at 1.5635.

AUD jumped after the US employment report, nearly testing yesterday’s breakout. We reached 0.8617, just south of what had been key support at 0.8735. Prices were crushed as low as 0.8577 bouncing off the 200-day moving average there. It rebounded sharply to end at 0.8680.

Have a great weekend all. Get some rest after a very hectic week…

• ECB leaves rates unchanged at 1%
• France, Germany vow to balance budgets by mid-decade
• US weekly jobless claims rise to 480,000 from 472,000
• US productivity rises 6.2% in Q4
• Trichet: Rates appropriate; will continue “enhanced credit support“; confident Greece can close deficit
• Geithner: China could let Yuan move
• Berkshire Hathaway downgraded to AA+ from AAA by S&P
• Spanish stocks fall 6.1%, Germany down 2.6%, German 2-year bund yield falls to 1.05% as peripheral bond yields soar
• Fed’s Dudley leaves door ajar for extending MBS buys if needed
• Fed’s Hoenig: Time for Fed to end low rate pledge
• S&P 500 falls 3.1%, 10-year notes slide 10 bp to 3.60%
• Oil falls $4 to $73.00, Gold falls $50 to $1060.

Bedlam, chaos, tumult…

That’s the best way to describe the latter stages of the European trading session. Risk aversion reached epic proportions driving EUR/JPY off a cliff, taking the likes of AUD with it.

The macro picture has turned very sour for risk in general and the euro in particular. Hopes that the single currency would soon rival the dollar as a major reserve currency have been dealt a severe blow by the explosion of volatility in European bond markets. There are a handful of stable European credits like Germany and Holland but many are now under a under a harsh glare to which they are not accustomed. That has badly hit confidence in the euro zone as a whole which is clearly reflected in the weakening euro.

Bubble-fed economies like Australia and Brazil are at risk against this risk averse backdrop helping send their currencies and share markets lower.

Tomorrow’s US employment report is almost an afterthought at the moment with these major macro factors working through the minds of investors.

EUR/USD fell as low as 1.3727, a level that was retested at the Wall Street close. Barriers at 1.3800, 1.3775 and 1.3750 were triggered. 1.3725 and especially 1.3700 triggers are still in play.

Comments from Geithner that he expects China to move on the CNY sent EUR/JPY into freefall.  It fell to 121.57 from 1234.40. Major support at 124.45 had already given way moments before.

AUD/USD broke through the 0.8735 major support level, sliding as low as 0.8606. Liquidation of AUD/JPY added to an already nasty environment for the Aussie.

Cable held up best of the majors, maintaining a toehold above its October low at 1.5705. 1.5733 was the New York low.

Best of luck tonight.

• 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.

ome

• Prospects of an imminent rate hike in New Zealand are receding after the unemployment rate rose to a 10-year high, fuelled in the main by increased migration
• The NZD/USD fell from .7080 to .7005 immediately after the announcement and has failed to recover as the session progressed, closing close to it’s fresh new lows at .6975
• The AUD also fell sharply on much worse than expected December retail sales
• The AUD recovered lost ground quickly on strong home building approvals
• China: new loans in January >1.5 trillion Yuan
• Toyota shares slump dragging the Nikkei lower
• South Korea still aims for 5% GDP growth but uncertainties growing
• Other regional bourses fall, losing 1% on average
• Gold steady around $1110/oz

Traders generally had expected a very quiet session today with both the ECB and BoE meeting in a few hours.

The NZD ensured some early volatility after the very poor unemployment numbers. The NZD fell dragging the AUD down along with it. This spread somewhat into the other majors as NZD/JPY selling from Japanese retail accounts spilt over into the other JPY crosses.

The AUD/USD fell from .8820 to .8775 on the disappointing retail sales numbers but traders were unwilling to challenge supposedly strong corporate and Sovereign bids starting at .8770. The AUD/USD then jumped quickly back above .8800 when the market assessed the strong building approval numbers. Lots of bids between .8750/70 but watch for heavy stops just below. Range: .8775/.8830

EUR/USD also tried to break lower when the NZD/JPY selling was at its peak but it couldn’t get much below 1.3870. The talk is of heavy buying interest from both China and the BIS ahead of 1.3850, but as in the case of the AUD/USD, large stops are tipped below 1.3850. Range: 1.3868/1.3903. NY close 1.3895.

Cable has been generally well bid today as traders anticipate the BoE initiating a pause in its bond buying program. EUR/GBP has drifted slightly lower. Range: 1.5882/1.5918. NY close 1.5895.

USD/JPY has been unaffected by the Toyota story and has traded again in a tight 90.80/91.06 range. EUR/JPY has drifted slightly lower in a 136.08/47 range. There is still talk of good sized bids at 125.75.

Markets: Nikkei -0.5%, HK -1.5%, Shanghai -0.5%, Sydney -0.8%, Kospi -0.3%. Gold steady at $1110/oz.

• ADP employment report shows loss of 22,000 private sector jobs
• Greek labor unions call for anti-austerity strike on Feb 24
• ISM non-manufacturing PMI 50.5 in January from 49.8 in December
• JP Morgan global service sector PMI 51.2 from 51.8; all-industries PMI 53.2 from 53.1
• Portuguese credit default swaps widen to 196 bp from 167 yesterday
• French official: Greece will  not have trouble funding itself, solve problems on own
• Obama: China must address currency rates
• Senator urges Obama to label China currency manipulator
• US transportation secretary backs off advising Toyota drivers to stop driving them
• Bernanke: Economy recovering but unemployment too high, lending too low
• S&P 500 falls 0.55%; US 10-year notes +7 bp to 3.70%
• Oil falls 0.3%, Gold ends down at $1109 from $1124 session highs.
• Copper falls 3.75%, undermines AUD

EUR/USD was pressured throughout the US session, falling from opeing levels of 1.3995 to the 1.3890 area, retesting session lows from early on Tuesday before stalling. EUR bulls spent the day liquidating fresh long positions after just yesterday it looked as though the market had switched to a risk-seeking posture.

Heavy sales from options-related accounts and Asian central banks in the 1.4020/25 area helped stall the early rally. Rapidly widening spreads over German benchmark bond yields by Portuguese and Spanish bonds spooked the market, as did a rumor of an imminent Spanish debt downgrade. A statement from Moody’s denying any action on Spanish debt did little to halt the slide. 1.3995/1.3889 was the range.

USD/JPY firmed through important resistance at 90.95 after the US economic data as well as the comments from the Transportation Secretary telling owners to stop driving their cars and to return them to dealers. He moderated his statement later, helping ease USD/JPY from 91.28 highs back to about 90.94 late in the session before it stabilized. A close above the 90.95 level will be viewed favorable from a technical perspective.

EUR/JPY made an early run for stops above 127.00 but slipped back as the Portuguese markets began to fall on deficit jitters.  126.40/126.98 was the US range.

A big slide in copper combined with a whiff of risk aversion helped send AUD slumping during the US session. It fell as low as 0.8815 from 0.8903 highs.

Cable slipped back as low as 1.5888 with dealers scrambling to cover dollar shorts for most of today’s session across the board.

Expect a quiet session in Asia tonight as traders wait to hear from the BO and ECB tomorrow.

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