• German March wholesale prices -0.9% m/m, -8.0% y/y. Weaker than expected (vs median forecasts of -0.3% and -7.4% respectively.)
  • UBS says it expects to report a net loss of almost 2 bln swiss francs in the Q-1 2009. To step up cost cutting. Will cut its workforce by 8,700 from current level
  • Spanish final March CPI +0.2% m/m, -0.1% y/y
  • Air France-KLM to cut up to 3,000 jobs by 2011
  • DCLG: UK house prices fell 12.3% y/y in February compared to 11.5% in January
  • The Royal Institution of Chartered Surveyors (RICS) adjusted house price balance rose to -73.1 in March from -78.1 in February

Day started off with risk aversion to the fore. A couple of newspaper articles were noted, one in The Telegraph highlighting fact S&P expects a third of Europe’s junk bonds to default. The other article was in the WSJ and highlighted fact that some of the biggest mortgage companies in the US are stepping up foreclosures on delinquent home owners.

UBS didn’t help matters, saying it expects to report a net loss of almost 2 bln swiss francs in the Q-1 2009. The bank will step up cost cutting and will cut its workforce by 8,700 from current level.

Cable has had a rollercoaster ride today. Started off around 1.4885 in Europe before selling off to 1.4824 as the market focused on the fact that the recent rally in banking/financial stocks was stalling. Obviously the news from UBS hurt sterling given it’s a proxy for the health of the global banking sector.

The sell-off didn’t last long and soon cable was rallying to beat the band. Sources noted talk that there was alot of switching out of swissy into sterling via custodials going on, apparently for the purpose of buying UK equities. GBP/CHF is up at 1.7080 from an early 1.6960. FTSE outperformed other European stockmarkets this morning.

There was also interesting talk in Asia of soveriegn names diversifying out of euro into sterling and aussie. EUR/GBP is down at .8855 from an early .8905.

Sterling also got a boost from the latest RICS survey, suggesting the pace of decline in UK house prices is slowing. Cable hit a high of 1.4971 before slipping back slightly to 1.4950 at writing.

EUR/USD came under pressure early on the increased risk aversion, but managed to steady after the Bank of China came in buying at 1.3210 and as stocks saw some slight improvement.