• China’s Wen: China considering greater involvement in EFSF and ESM stabilization funds
  • Merkel: China says Europe must do its homework first in euro zone crisis, then ready to work for stable euro
  • BOJ’s Yamaguchi: To consider possible policy action after examining impact of high yen. Don’t think recent yen rise will trigger immediate policy action (surprised USD/JPY held up after that second comment)
  • European officials seek to involve central banks in Greek haircut – Handelsblatt
  • Greek govt spokesman: Bulk of talks with Troika lenders over. A few sticking points remain (who wud have thunk it?)
  • Italy Minister has told unions government will push ahead with labour market reforms, even without their agreement – Source close to talks
  • Irish central bank: Outlook for global economy exceptionally uncertain, risks clearly to the downside. Europe has not done enough to convince markets it can deal with debt crisis
  • Spanish auction results
  • French auction results
  • Swiss trade surplus 2.0 bln in December, down from revised 2.945 bln in November and worse than expected 2.5 bln
  • UK January construction PMI 51.4, down from 53.2 in December and below Reuters median consensus 52.6
  • Euro zone December PPI -0.2%m/m, +4.3% y/y, as expected

Focus very much on EUR/USD this morning. EUR/USD down at 1.3100 from early 1.3170. Inbetween we’ve been as high as 1.3193 and as low as 1.3085.

Early rally ran into combo of BIS/China selling above 1.3185 and we headed quickly lower. We eventually got as low as 1.3120/25 area where BIS duly booked profit and we bounced back.

Things seemed to have slowed down when above headline from China’s Wen saw us spike to 1.3193 before just as quickly falling back. Further comments from Wen and Merkel made for a more cautious read on things.

The downside accelerated a little as talk circulated that there was sell interest lined up for the 13:15 GMT fix, but it was comments from EU’s Junker that tripped sell stops through 1.3115 and saw us fall as low as 1.3085 before steadying.

USD/JPY unchanged at 76.12. Talk of Japanese bids just ahead of 76.0 (guess they include Kampo, but haven’t had it confirmed like yesterday.)

Sell stops said to lie through 76.00, 75.80 and 75.50.