• Taiwan President expects more than 500 people killed in aftermath of typhoon
  • Shanghai share index ends down 3%, down 6.5% for the week
  • John Lewis weekly department store sales down 5.3%
  • French Q-2 non farm payrolls -0.5% q/q vs median forecast of -0.9%
  • Japan’s ruling LDP’s Hosoda: Would take added stimulus steps if needed
  • UK home repossessions fall to 11,400 in Q-2 from 12,700 in Q-1 2009 – CML
  • Euro zone July inflation -0.7% m/m, slightly weaker than median forecast of -0.6%

Bit of a funny old morning. At the end of the day not a huge difference in levels but there have been flurries of activity to keep the market on it’s toes.

GBP/USD having started out extremely steady in Europe around 1.6565 suddenly came under heavy pressure. Stops were triggered below 1.6540 and 1.6500 bringing about a session low of 1.6488 in double-quick time.

It’s hard to pinpoint any fundamental reason for the aggressive sell-off, although it did seem to coincide with Bloomberg putting up an article regarding US banks and worrying levels of toxic debt.

Obviously sterling’s fortunes are tied rather closely to the health of the global financial sector. Sources noted custodial and macro funds among those selling aggressively.

Then almost as quickly cable was rallying higher, back almost to where it started out. Sources noted Middle Eastern names buying aggressively around the lows. This is becoming something of an ongoing phenomena of late, middle east buying surfacing on any decent dips. Cable sits presently at 1.6540.

EUR/USD trading has been pretty much a non-event. Pairing presently at 1.4275, up about 10 points. Topside is currently being curtailed by expectations of Asian sovereign sell interest lying in wait up around 1.4300. Indeed one source very specifically noted China having been on the offer at 1.4295 in overnight Asian trade.

USD/JPY has come under further pressure, presently down at 95.05 from an early 95.20. There was talk of China on the bid ahead of 95.00, protecting option interest at said level, but that was swept aside in a flurry of activity.

The pairing reached a session low of 94.87 before bouncing strongly back above 95.00. The rally was purely technical in nature, the 94.86 level well-touted as the base of the ichimoku cloud, seen by some as a significant technical support. Having said that, the rally has faded and USD/JPY continues to look heavy.

Buy orders seen at 94.80/90, large stops around 94.70. Sell orders up at 95.50.