• Obama tells Putin they may not agree on everything, but can have tone of mutual respect. Excellent opportunity to put relations on a much stronger footing
  • Iranian opposition leaders criticise imposed “security state”, call for release of protesters
  • French May trade deficit -2.718 bln euros, better than median forecast of -3.7 bln
  • UK May industrial production -0.6% m/m, -11.9% y/y, much weaker than expected
  • USD should remain key global currency. China not serious about near-term change in global currency system – JBIC’s Watanabe
  • Anti riot police move in to try and quell trouble between Han Chinesee and Uighurs in Chinese town of Urumqi- Reuters reporter
  • USD will be important for decades. Not easy to replace it in world trade, but possible over time. World dependence on single currency not good thing – Brazilian President
  • German May factory orders +4.4% m/m, -29.4% y/y, much stronger than median forecasts of +0.5%, -31.2% respectively
  • EU Almunia says all conditions met for Latvia aid programme to be successful

Lively enough morning session. Euro has seen some strength, EUR/USD up at 1.4040 from an early 1.3980, while EUR/JPY is up at 133.80 from around 133.35. Sterling on the otherhand has seen across the board weakness.

Started out very differently for EUR/USD though, heavy selling took it to a session low 1.3904. Middle Eastern names and a certain US bank were active selllers on the way down. However well touted buy orders in 1.3900/20 area managed to hold the line.

China had been a buyer overnight around 1.3950 and there’s a good chance they were among those loading up in the low 1.39’s, although didn’t get confirmation of such. Rather one particular middle eastern name was seen as a notable buyer getting the subsequent rally going.

We were already back around opening levels when much stronger than expected German factory order data took out noted sell orders at 1.3990/00, triggering stops just above and taking us to a session high 1.4040.

EUR/GBP has seen good buying interest this morning and this has helped underpin the EUR/USD rally.

Cable is down on the day, presently at 1.6220 from an early 1.6285. Here again Middle Eastern names were the noted early sellers and stops below 1.6250 and 1.6200 accelerated the move lower. The release of weaker than expected UK output data forced cable down to a sesson low around 1.6150 before partial recovery.

The proximity of the BOE rate decision Thursday and the possibility of additional QE continues to weigh on sterling.