* UK Unemployment comes in much better than expected rises by 39.3k in May, against the expectation of a 60k increase. April’s figure was revised lower too to 49.6k from the initially reported 57.1k. Unemployment rate rises to 7.2%
* Bank of England votes 9-0 to keep rates at 0.5% and keep Q/E at 125 billion pounds. Warns that the rise in Sterling could reduce the boost to net trade and would reduce CPI pressures in the short-term. Says that the risk of a continued sharp contraction in output have receded somewhat, but medium term downside risks to the economy remains.
* Eurozone trade balance improves to 2.7 bln Eur in May, but exports and imports both fall.
* ECB’s Constancio says there are risks of a prolonged period of weak growth, criticises the US external imbalances and says that some Dollar depreciation is desirable but doesn’t think it will fall sharply and a big Dollar fall would cause large problems for the world economy.
* ECB’s Bonello on rate cuts says that nothing is excluded and nothing is agreed in advance. ECB already working on an exit strategy from generous liquidity.
Once again it was Sterling that provided most of the liquidity this morning. A brief pop up to 1.6480 first thing was quickly sold into and we lost a big figure in quick time, before the better than expected Unemployment report provoked an exceptionally short lived rally to 1.6420, before the Sterling quotes, and the general pessimism in the BOE minutes quickly put Cable to the sword to press it down to the lows we see now at 1.6230. Bids are now seen in the 1.6200/15 area.
Eur/Usd also popped higher at the open but Asian central banks were seen at 1.3920 and since then its been a slow slide lower only really curtailed briefly by the ECB’s Constancio’s Dollar comments. Back now at 1.3845 with everyone focused on the critical 1.3800 level.
