• Japan revised May industrial output +5.7% m/m from prelim +5.9% – METI
  • Japan May capacity utilisation index +8.0% m/m – METI
  • Japan unadjusted June consumer confidence index 37.6, up from 35.7 in May – Govt
  • Japan’s PM Aso plans to call a general election on August 30
  • Spain’s Economy Secretary sees GDP contraction for Q-2 2009 “substantially less” than Q1. Cutting Spanish public debt to 3% by 2012 “feasible” – paper
  • Swiss producer/import prices flat m/m, -5.6% y/y, little weaker than median forecasts of +0.2% and -5.4% respectively
  • Russian central bank may have bought roubles around 38.90 vs basket – Dealers
  • UK banks it’s invested in face inevitable effects of recession, significant legacy losses – UKFI
  • Selling UK bank stakes into market “would inevitably take several years” - UKFI CEO
  • Japan government upgrades economic assessment in July for third straight month

Sterling weakness continued a major feature this morning, GBP/USD down at 1.6075 from an early 1.6105, while EUR/GBP is up at .8685 from around .8640.

The IMF’s conclusion that UK’s indebtedness leaves it unable to provide vital stimulus to the economy over next 18 months, and reports Lloyds to write off some £13 bln, have continued to weigh on sterling. Comments from UKFI (see above) will also not have helped sentiment.

Cable garnered some support initally when China stepped into the market buying around 1.6070 but the subsequent rally was short-lived with a US bank out of London seen a notable seller. Stops just below 1.6050 were eventually triggered sending the pairing to a 1.6034 session low before some recovery.

EUR/USD was under pressure early in anticipation of European stocks opening lower, but ran into good buying interest touted down at 1.3890/00. The subsequent rebound in stocks has seen the pairing rally back.

USD/JPY has had an active morning. Starting off around 92.40, the pairing was already drifting lower, when news the Japanese government had upgraded its economic assessment for July sent the pairing quickly through 92.00 to post a session low 91.75.

From there we saw a quick rally back over 92.00 as EUR/JPY ran into very strong buying interest down at 128.00. USD/JPY is back up at 92.20 while EUR/JPY has soared back to 129.00.

Had been half expecting rumours of Kampo buying down below 92.00 (as heard Friday), but didn’t hear anything.