• US-China trade imbalance not sustainable. China must shift from export-led growth, increase exchange rate flexibility. US, China have special responsibility to reduce greenhouse gas emissions – U.S. Commerce Secretary Locke
  • Swiss retail sales -1.4% y/y in May versus +1.2% in April
  • Russia Central Bank Deputy Chairman Melikyan sees no alternative to dollar, euro in near future
  • UK June jobless claims +23,800, better than median forecast of +41,200. Claimant rate 4.8%, highest since November 1997
  • UK ILO jobless +281,000 3 mnths to May, biggest rise on record. Rate 7.6%, worse than median forecast of 7.4%, highest since January 1997
  • Euro zone June inflation confirmed at +0.2% m/m, -0.1% y/y, same as flash, median forecasts
  • Magnitude 7.8 earthquake strikes near New Zealand – Japanese Agency
  • Plane crashes in Northwestern Iran, killing all 168 onboard

Risk appetite still in good nick this morning, in the wake of recent strong US earnings. This has weighed on USD and JPY.

EUR/USD started out around 1.3985 and euro bulls were quickly off the mark probing for touted sovereign sell interest said to lie in low 1.40’s. When it didn’t materialise stops just above 20 and 50 were triggered sending us up to a session high 1.4070.

There have been murmurings of sovereign selling up at 1.4070, but nothing concrete. Rather sources note option-related sell orders lined up at 1.4070 up through 1.4100. We’re presently sitting at 1.4060.

Cable started off around 1.6320 and was soon rallying, taking out sell orders at 1.6340/50 and triggering stops just above. Middle Eastern names were mentioned as strong buyers early. We reached a session high at 1.6408 before stalling out.

Sources noted Middle Eastern and Asian names selling above 1.6400. Indeed an Asian sovereign was reported a notable seller around session high.

We were hovering around 1.6390 as the latest UK jobs data came out and the weak report has so far put paid to any rally extension. We’re presently at 1.6370.

USD/JPY sits at 93.50, all but unchanged on the day.

EUR/JPY is firmer, up at 131.55 from an early 130.80, the cross underpinned by decent risk appetite. Comments from Russian central banker that he sees no alternative to euro and dollar in the near term has also lent cross support.

Sources report sell orders lined up at 131.50 up through 132.00, which have so far helped cap rally at 131.68.