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Moody’s sovereign head: “More likely than not” that Greek debt rollover would be a credit event

Why do they always wait till I’ve one leg out the door.

• Hard to see how any Greek rollover would be truly voluntary, would therefore be a default
• Impossible to have orderly and effective Greek debt restructuring
• Any Greek restructuring would have to be big to be effective, therefore disruptive for ECB, banks
• Euro zone, ECB has resources to contain short-term financial pressures

Euro Zone must use its collective strengths

Paul Hannon in WSJ.

GBP/YEN: Large 132.25 expiry

Talk in the street of a large 132.25 option expiry in the cross today, which has been fairly heavily traded in the market over the past week.   GBP/YEN rose to 132.08 recently from o/n lows in Asia around 130. 90 and may attract to the level nearer the 1400 GMT cut.

ForexLive European wrap: Strong German/EU data and comments from China boost the euro

• China SAFE official: Warns of risks in “excessive” holdings of US dollar assets. Later clarified as saying  the comments represented his personal view
• Euro Zone  April retail sales  +0.9% m/m +1.1 y/y, well above median forecasts of +0.4% and flat respectively
• Greek Senior Govt officials: Government not planning any austerity referendum
• UK Telegraph: ECB risks being ‘wiped out’ by bail outs
• WSJ: Chinese companies embark on shopping spree in Europe
• UK Halifax May house price index rose 0.1 % m/m against Reuters median forecast    of   +0.2%
• Swiss May CPI flat m/m,  +0.4% y/y, in line with Reuters median forecast
• German April manufacturing orders rose 2.8% m/m, surpassing median forecasts of  +2%
• Kuwait oil Minister: Sees need for more oil in market, higher demand in Q3, Q4 mainly from Asia. 

EUR/USD:  Early downside pressure on the  back of  Juncker’s  “overvalued” comments on the euro overnight, was soon unwound on the European opening as the pair  bounced from 1.4611 . Large offers at 1.4650/55 managed to cap the early rally at 1.4651.  

We were back down in the 1.4625/30 area when comments from Chinese SAFE official (see above) hit the wires.  A sharp rally then ensued, aided by reports that China was actually in buying.  Stops were tripped through 1.4660 on the way to session high 1.4684.  Offers there presumed in defense of  1.4700 barrier interest then capped the rally. 

GBP/USD: Rallied sharply from initial european session lows of  1.6353, but was tempered by eastern european sellers ahead of 1.6400.  The China comment then helped cable  break higher, eventually tripping stops through 1.6460 on the way to session high 1.6474 where we topped out. Decent offers noted at 1.6480/00.

EUR/GBP assisted the move in cable, heavy real money sales  pushing the cross down from highs of  0.8946 to 0.8910

USD/JPY:  Failed to get any momentum either way  and  became bracketed into a 80.16-34 range for the morning as real money buyers were pitted against exporter sales. Traders seemed more interested in the EUR/JPY cross,  which jumped to 117.76 from 117.33 as EUR/USD rallied.

Commodities were relatively quiet but firmed up from early Asian falls, with stocks reversing higher. Gold picked up to $1549 and silver to $37.26, whilst WTI July crude oil rallied to $99.27 after falls in Asia to  $98.31 with traders cautious ahead  of tomorrow’s OPEC meeting.

Kuwait oil minister: Sees need for more oil in market, higher demand in Q3, Q4 mainly from Asia

• Expects OPEC to increase output at Wednesday meeting
• OPEC needs to act due to Libya, Mideast unrest

German April manufacturing orders +2.8% m/m

Stronger than median forecast +2.0%.

March revised up to -2.7% m/m from initial -4.0%

Euro zone retail sales for April +0.9%, +1.1% y/y

Way stronger than median forecasts of +0.4%, flat respectively.

Relatively muted reaction so far, EUR/USD sits at 1.4677 having been as high as 1.4682.

 Maybe people had already positioned for better than expected numbers.  As I told Silverwing, a bank I respect was looking for a better than expected number, albeit only +0.6%.

Barrier option interest, as aforementioned, at 1.4700.

China SAFE official: Comments on dollar holdings represent his personal view only

China seen buying EUR/USD

In recent trade.  Well that’s what I’m hearing.

We’re at 1.4657 having been as high as 1.4665.   Barrier option interest, not surprisingly, noted at 1.4700.

Why do I feel a little wary of the China sighting? It’s just the timing, straight after the comments. Doesn’t feel right. Oh well, maybe it’s just me. I’ll get over it.

China FX official: Warns of risks in “excessive” holdings of US dollar assets

Just bloody great.  EUR/USD back up at 1.4640.

• US dollar will continue to weaken against other major currencies
• There is no basis for sharp yuan appreciation
• Market conditions ripe for two way yuan movement

Doesn’t he know I’m feeling fragile and looking for a gentle day. I think he did it on purpose.