• European stability mechanism could take contribution from financial institutions. One-off tax of 0.2% on euro area bank assets would allow about 50 bln euros to be raised
  • ECB buys periphery bonds again
  • Portuguese FinMin: Bond auction a success, 80% demand from foreigners
  • ECB’s Costa: Portugal bond auction shows sign of improving market confidence
  • Merkel: Portuguese debt auctions apeared to have gone quite well
  • China C.Bank advisor: Debt crisis will not change long-term strategic position of the euro
  • Thai central bank raises policy rate by 25 bps to 2.25%
  • Italy’s November industrial output +1.1% m/m, much stronger than median forecast of +0.5%
  • UK November visible trade -£8.736 bln, worse than median forecast of -£8.33 bln

Morning’s hummed along, infact it’s been quite busy when all said and done. That said, not a huge lot of difference in most pairings.

EUR/USD sits at 1.2980, effectively unchanged on the day. Inbetween though we’ve been upto 1.3046 and then all the way down to 1.2962 before steadying. Hedge fund buying was noticeable early (carbon copy of yesterday) and we moved above 1.3000 quickly. Large US custodial also noticeable buyer early on. Bit of a struggle, but eventually stops tripped through 1.3025 and we rallied to test well documented sell orders at 1.3040/50.

The sell orders proved durable barrier and we were quickly slipping lower again. Doesn’t seem a lot of conviction in the markets yet. The selling accelerated in the wake of the Portuguese auction results with UK clearer major seller. At the same time US treasury yields climbing higher. I think USD strength in late morning as much to do with US yields as Portuguese auction. At the end of the day Portugal got what they needed with decent demand. Yields high, but hey you cant have everything.

Talk of buy orders now clustered down at 1.2950

Cable marginally lower at 1.5610 from early 1.5630. Inbetween been upto 1.5679 and then all the way back down to 1.5582. Cable had just reached session high and was turning lower when poor trade data helped give it a further push.

India eventually stepped in buying around the lows lending much needed support.

USD/JPY up at 83.35 from early 83.10, underpinned by firmer US treasury yields.

AUD/USD up at .9890 from early .9850. The pairing got off to a flying start as talk circulated of large buy interest from US custodial lined up for the 08:00 GMT fix. By the time we got to the fix we stood at .9905. Tacked on another 20 odd points before topping out and following EUR/USD lower.