• Merkel: Must prevent disorderly process in euro area, Greece must fulfill its troika obligations
  • Italian treasury confirms meeting last week between EconMin Tremonti and Chinese delegation, no comment on content of meeting
  • Italy will start talks on possible further measures to cut debt, spur growth in next few days
  • Italy’s Berlusconi: Determined to achieve budget balance in 2013
  • Italian govt spokesman: Optimistic Moody’s will not downgrade Italy – Treasury official
  • Italian auctions 3.865 bln Sept 2016 BTPs. Yield 5.60%. Yield highest since euro introduction. Bid to cover ratio 1.279
  • Greek 10 year bonds slide, yield climbs to 25% for first time
  • ECB buys Italian and Spanish bonds again
  • French August CPI +0.5% m/m, +2.2% y/y, stronger than median forecasts +0.3%, +2.0% respectively
  • French July current account widens to -4.5 bln vs unrevised -3.4 bln in June
  • Spain August CPI +0.1% m/m, +3.0% y/y, pretty much in line with median forecasts of +0.1%, +2.9% respectively
  • UK August CPI +0.6% m/m, +4.5% y/y, in line with median forecasts
  • S&P report: Australia’s economic recovery still on track

Never before has so much energy be expended for so little net result. We’ve been all over the map (shop) and finish not far from whence we started. All it’s done for me is make me feel mildly nauseous.

EUR/USD sits at 1.3658, very marginally easier from early 1.3675. Inbetween we’ve been up to 1.3695 then all the way down to 1.3556 and then back up again. Early rally ran into very strong real money selling.

Then as talk circulated that China has turned down Italy’s request to buy their sovereign debt, so the pairing went into freefall. European stocks started out firm and duly collapsed, helping accelerate the sell-off in the single currency.

BIS turned up buying just below 1.3600 and we rebounded back to around 1.3620/30. But as European stocks tacked on further losses so EUR/USD extended sell-off.

We got as low 1.3556 with the BIS still buying before recovering almost as quickly as we’d sold-off. Strong option related buying was also reported around the lows. The recovery has slowed somewhat into lunch, with leveraged names noted selling above 1.3660. All in all, mind-numbing stuff.

Cable down at 1.5805 from early 1.5855, but some way from session low 1.5761. Sovereign buying noted around the lows.

USD/JPY effectively unchanged on the day at 77.00.

AUD/USD down at 1.0305 from early 1.0365, but some way off session low 1.0258. Sovereign buying noted under 1.0300.