• Shanghai stock index up 2.1% at 3 week closing high
  • UK June PSNCR 20.905 bln, much worse than median forecast 16.0 bln. PSNB 14.498 bln, worse than median forecast of 13.0 bln. Public sector net debt rises to 63.9% of GDP, highest since records began in March 1993
  • UK mortgage approvals by major UK lenders 48,000 in June from 51,000 in May, sharply lower than median forecast of 52,000
  • UK Treasury spokesman: June public borrowing figures show urgency of tackling the budget deficit
  • Hungary sells HUF 35 bln 3-month bills. Hungarian debt agency cuts 45 bln offer by 10 bln to 35 bln
  • German assoc of public sector bank’s president tells reuters he has no indication any Landesbank will fail the stress test
  • ECB’s Nowotny: Happy that stress tests are strict enough, doubts unfounded. Where bank’s capital is not adequate has to be govt measures in place
  • German June PPI +0.6% m/m, +1.7% y/y, stronger than median forecasts +0.2%, +1.1% respectively
  • UK CBI manufacturing order book balance -16 in July from -23 in June, better than median forecast of -24. Highest read since August 2008
  • Swiss June trade balance 1770 mln francs
  • Dutch July consumer confidence -14 from -18 in June
  • Uk’s Cameron: Britain is not America, needs to cut defcit now. Tackling deficit will enable Uk interest rates to remain low

Well that was certainly eventful. If anyone has a real clue what went on please let me know.

EUR/USD started around 1.2970 and rallied sharply just as European trading got underway. Some seen buying aggressively were the Big German, a US investment bank and various Middle Eastern names. We rallied over 1.3000 in the blink of an eye on way to session high at 1.3028. Talk had stops above 1.3020 as sizeable, but price action didn’t suggest that to be the case.

We were quickly on the defensive. Not sure who was selling around the highs, but large European corporate sellers were reportedly offloading around 1.3000. The BIS stepped in buying around 1.2970 which lent temporary support, but eventaully stops through 1.2965 were tripped as European stocks came under heavy pressure. Talk had someone selling 63k eurostoxx futures (approx 1.7 bln euros worth).

The fact that Hungary cut back theiir offering of 3-month treasury bills also seemed to unnerve the market. Real money then entered the fray selling and stops through 1.2920 were tripped. We sit present;ly at 1.2895.

Cable started around 1.5265 and rallied initially reaching session high 1.5309. Uk clearer was seen selling at 07:00 GMT fix and clearer selling was seen throughout the morning. Cable sat at 1.5275 just prior to really horrible Uk public fiinances data. That triggered a heavy sell off and we’re presently down at 1.5175.

USD/JPY sits little changed, marginally easier at 86.90 from early 87.05 but ostensibly confined to narrow range with 86.50-87.30 proving durable parameters recently.