• Russian President Medvedev will raise reserve currency issue at BRIC summit – Kremlin aide
  • BRIC leaders to discuss mutual trade settlements, reserve investment in BRIC currencies, swap agreements – Kremlin aide
  • Russia says rouble, yuan, commodity currencies, gold deserve to be included in SDR basket
  • Russia’s Medvedev says world will witness the creation of a supranational currency. Existing reserve currencies, including dollar, haven’t performed their functions
  • Swiss industry orders drop -17.6% y/y in Q-1. Much weaker than median forecast of -10.0%
  • Iran’s top legislative body says ready to recount presidential election votes. May lead to changes in candidate’s tally
  • UK May CPI +0.6% m/m, +2.2% y/y, stronger than expected vs median forecasts of +0.3%, +2.0% respectively. Cable spurts higher
  • ZEW institute June German economic sentiment index 44.8 vs 31.1 in May, stronger than median forecast of 34.0. Even stronger than rumoured 40.0 read. ZEW economist says results suggest recession nearing its lowest point. EUR/USD firmer
  • Dutch economy to shrink -4.75% in 2009. Revised down from earlier forecast of -3.5%. Dutch unemployment to rise to 5.5% in 2009, 9.5% in 2010 -Dutch govt think tank CPB

Hectic morning, infact very hectic morning. USD and JPY weaker this morning.

Dollar came under pressure almost straight away this morning as a plethora of comments (see above) hit the wires indicating that the reserve currency issue was very much going to be on the BRIC summit agenda. So much for yesterdays comments, just so much old toffee.

EUR/USD started out around 1.3805 and rallied as the Russian comments regarding reserve currency issue filtered through. The currency also got a lift as rumours circulated that the German ZEW survey economic sentiment indicator was going to come in with a read of 40.0, much better than median forecast of 34.0. Infact it turned out that the rumour was short of the mark, the read was actually 44.8. The news sent EUR/USD to a session high 1.3923 before settling back to 1.3880 at writing.

Cable rallied early on the back of the Russian comments and then the pairing got a major lift from the stronger than expected UK CPI data (see above) which served to heighten speculation that an earlyish BOE rate hike might be on the way. Another boost came soon after with the release of the much better than expected ZEW data. Cable having started off around 1.6250 has been all the way up to a session high 1.6480 before settling back to 1.6420 at writing.

USD/JPY started off around 96.60 and fell to a session low 96.08 as the USD saw across the board weakness. However the JPY was soon on the backfoot as the market experienced a heavy bout of short covering on the yen crosses. The JPY won’t have been helped by comment from BOJ Governor Shirakawa that there’s no guarantee the Japanese economy’s revival will be sustained.

EUR/JPY having started off around 133.35 fell to 132.70/80 where a swiss investment house was reportedly a very aggressive buyer of the cross. We’re presently back up at134.40 on the cross, USD/JPY is back up at 96.75.