Europe open to risk aversion after Asian equity and commodity markets came under fire, with the EUR/USD lows seen in early Europe on the back of reports of differences between the IMF and EU/ECB over Greek sustainability.

EUR hit lows of 1.3673, before a Dow Jones report stated there was no doubt that the tranche would be disbursed and we bounced back into offers at 1.3720.

ECB buying of Italian and Spanish 10 yr bonds led a stronger move up through stops at 1.3760 . Release of the EU guideline report stating EFSF could be used to buy bonds then opened the door to a panic rally through stops at 1.3875 and 1.3800 to 1.3843 .

Leveraged sellers and Asian names (possibly sovereigns) then turned the tide, with a drop back to 1.3780/85. Stops are building above 1.3850.

Cable lagged the rally ( as EUR/GBP bounced off lows of 0.8709 to 0.8767) after early lows of 1.5693, but later gathered some steam before hitting a wall of offers around 1.5800 (high 1.5803) as EUR/GBP fell back to 0.8740.

EUR/CHF struggled to break higher through 1.2440, slipping back all morning and triggering stops down through 1.2380 to 1.2362.

USD/JPY traded 76.68-76.86 with EUR/JPY shadowing EUR/USD from 104.89 up to 106.30

AUD/USD recovered after being under the cosh in Asia on the back of heavy base metal sales, but a move down to 1.0147 failed to fire off reported stops, with Asian CB’s then seen buying in the 1.0180’s leading a bounce to 1.0230. The EU guidelines release then took out stops through 1.0250 and 1.0265 to 1.0299.

Despite the euro rally, equity markets remain in the red this morning with FTSE down around 0.8%, STOXX – 0.9%, CAC -0.9% and DAX -1%, but all recovering from early lows.

Gold’s still reeling from further long bail outs on the back of heavy base metal sales in Asia slipping to 1607.75 from Asian highs of 1645.

Nymex crude for December picked up from 85.30 to 87.10 but later fell back to 86.00