• German May trade surplus s.a 10.3 bln euros vs 9.0 bln in April, better than median forecast of 9.0 bln
  • German May c/a surplus 3.7 bln euros vs 5.5 bln in April
  • German June final CPI +0.4% m/m, +0.1% y/y
  • Inflation risks broadly balanced. Euro zone economy expected to recover gradually, start posting postive quarterly growth rates by mid-2010 – ECB bulletin. Editorial in bulletin as usual close repeat of Trichet statement after last ECB meet
  • No comments on currency levels, daily moves, but will watch currency markets closely – MOF’s Sugimoto
  • UK May global goods trade gap £6.263 bln, down from revised £7.137 bln in April, better than median forecast of £6.75 bln. Lowest deficit since June 2006
  • Germany’s IMK economic institute cuts German 2009 growth rate to -6.5% from -5.0% in March forecast
  • China’s top two state oil firms’ inventories of gasoline, diesel, kerosene rose 4.7% in June to above 12 mln tonnes – Source
  • G8, G5 to say in statement they will refrain from competitive fx devaluations – German G8 source
  • Bank of England leaves rates, QE unchanged

Risk sentiment has improved today, with stocks, oil etc firmer. This has benefitted likes of euro and sterling. Interesting to see the inventories news out of China (see above)

EUR/USD started of around 1.3900 and was quickly moving higher as it became apparent european stocks were going to open on a positive note. The pairing ran into sell orders up at 1.3940/50 which stalled the move for awhile, but eventually they were chewed through and stops just above 1.3950 triggered.

The release of better than expected German trade data helped underpin the pairing. The news that China’s major fuel stocks were up 4.7% in June helped lift the pairing to a session high 1.3987. We’ve presently settled back at 1.3965.

Cable also got off to a good start, moving from an early 1.6085 up through 1.6100, but ran into a brick wall in the form of touted sell orders up at 1.6125/40 and we dipped back below 1.6100. However the sell-off very quickly did an about turn and we rallied strongly, stops above 1.6140 accelerating the move higher.

Cable garnered further underpinning with the release of better than expected UK trade data (see above), and with stocks climbing and the China inventories news, cable rallied nicely.

The pairing then spiked to a session high 1.6270 on the news the BOE had left rates, QE unchanged.

USD/JPY has had an active morning. Started around 93.05 and climbed to a session high 93.60 as the JPY saw general weakness on improving risk sentiment and official Japanese rhetoric that they were monitoring recent JPY strength closely.

China was a notable seller at the highs and we were quickly headed lower. Then a G8 source offered up the fact that the G8/G5 is to say in its communique that they will refrain from competitive devaluations. That helped alleviate Japanese intervention fears (hard for Japanese to intervene aggressively in USD/JPY having signed up for that) and we dipped below 93.00 where we remain. Pairing presently at 92.95.