• China Vice Commerce Minister: Yuan reform will be gradual, controllable. Talk this morning PBOC bought USD/CNY to slow sell-off
  • German FinMin: Chnia move on yuan is welcome. Move could help tackle global imbalances
  • Greek EconMin: Expects to see positive GDP growth from mid-next year
  • ECB’s Trichet calls for decisive progress in surveillance of government’s economic policy – Russia Today TV
  • Shanghai stock index closes up 2.9% in biggest daily gain in 4 weeks
  • S.Korea fx authorities buying dollars to curb won’s strength
  • MAS buying dollars to curb singapore dollar’s strength
  • ECB’s Stark: We have entered new phase of global crisis, sovereign debt crisis
  • ECB’s Provopoulos – Eurosystem buying securities because it does not consider Greek default a possibility – WSJ
  • ECB’s Noyer: Central banks have been very successful at fulfilling mandate aimed at price stability
  • ECB’s Wellink: Positive development that euro slide has come to a halt – MNI

Something of a typical Monday morning in Europe with the market struggling for any real direction. The greenback is generally marginally firmer, AUD/USD the exception. Things haven’t been helped by the weekend news that China is to relax the yuan’s peg to the dollar. Seems to me market is struggling somewhat to figure out what this news actually means for the forex markets.

EUR/USD down at 1.2400 from early 1.2425. Pairing initially rallied pretty well but ran into decent selling out of Russia. Fund selling was also noted this morning. The decline however has been slowed by sporadic sovereign buying, both Asian and Middle Eastern entities noted. The MAS and Bank of Korea were a couple of names mentioned.

Cable down at 1.4855 from early 1.4885. A major European central bank was seen selling decent amounts up around 1.4875/80. Focus is quickly turning to tomorrows budget and how it is perceived will play a major part in determining sterling’s near term fortunes.

USD/JPY up on the day, for once seeing some fairly decent price action during the European morning. We started around 90.80 and spiked higher when stops through 91.10 were tripped. We’re presently at 91.25.