• U.S. Senator Edward Kennedy dies at the age of 77
  • China’s State Council (cabinet) will move to curb industrial overcapacity
  • French headline unemployment rose by between 20k and 30k in July Le Figaro reports. The data is due out later today at 16:00 GMT
  • German July import prices -0.9% m/m, -12.6% y/y weaker than expected compared to median forecasts of -0.6%, -12.3% y/y respectively
  • Shanghai share index ends up 1.8%
  • German Ifo August survey: Better than expected. Expectations index 95.0 vs median forecast of 92.0, business climate index 90.5 vs median forecast of 89.0, current conditions index 86.1 vs median forecast of 86.0
  • Ifo’s Abberger: Cannot conclude that economic recovery is sustainable
  • ECB’s Gonzalez Paramo: Crisis not over. Urges banks to lend to real economy

Risk appetite was already starting to look somewhat jaded and has been eroded further by the news that China’s State Council (Cabinet) is to move to curb industrial overcapacity. This has particularly hurt commodity currencies like the aussie dollar.

EUR/USD at 1.4300 is effectively unchanged on the day. We climbed early and EUR/USD was sitting around 1.4330 when better than expected Ifo survey data (see above) came out. The data extended the rally to a session high 1.4349.

Once again fear of renewed China selling capped the rally. Haven’t heard confirmed reports of them having been in, but it hardly matters anymore. Such is the anticipation of such, it’s become self-fulfilling. Heaven only knows what it would take to get EUR/USD through 1.4400.

We drifted lower and the news out of China has just ensured further selling late morning.

Cable has been under pressure right from the get-go. Having started around 1.6325 the pairing came under fairly heavy pressure as the EUR/GBP cross continued it’s well-documented sojourn higher. A very brief dip to 1.6298 however saw the Reserve Bank of India come in and buy. This saw cable rally fairly well.

However the reprieve was short-lived and further sovereign and UK corporate interest just below 1.6300 hasn’t been enough to save the pairing from a deep slump. The China news helped take out stops below 1.6275 and we’ve been to 1.6257 session low, presently back up slightly at 1.6265.

EUR/GBP has moved up from an early ,8755 to .8790 at writing. Sell orders at .8790/00 protecting .8800 barrier option interest have so far capped the top-side.

AUD/USD is down at .8330 from an early .8370, the China news taking it’s toll.

USD/JPY at 94.10 hardly changed, effectively sidelined.