• Sterling sentiment starting to turn
  • Japan’s June trade balance +41.1% YoY; Japanese exports rose more than expected in June from a year earlier but the pace of increase slowed for the fourth straight month, a sign the economic recovery may lose steam on moderating overseas demand
  • UK economy: July house prices -0.1% MoM
  • EUR related news will be watched later in Europe; reports that some euro banks didn’t fully divulge details of sovreign debt; and the German EconMin’s increase in GDP forecast from 1.4% to 2%
  • Australian PPI rose 0.3% Q/Q 1.0 % Y/Y – a softer number than expected; if CPI follows suit later then rates likely to be left on hold
  • Japanese FinMin Noda and Spokesman Sengoku reported on reuters; further rhetoric and acknowledgement that reform needs to go ahead, cuts need to be made, economy is a mess and the yen strength isn’t helping
  • More of the Asian growth story – this time Korea – South Korean Economy Expanded Faster-Than-Estimated 1.5% in Second Quarter
  • Vince Cable in the UK urging the banks to ‘get lending’ to businesses to assist productivity, stimulate the economy
  • Wall Street Journal warns what we already expect the potential problem to be : European Banking’s Next Focus Is Funding

The stress test results from friday were received with a large amount of skepticism which led to a soft opening in Asia with a sell off in risk; this was short-lived as the market has reacted to strength in the EUR brought about by option plays and the attraction to test important levels particularly in EUR/JPY at 113.50.

For most of the session the ranges have been quiet although trading has erred with a risk-on tone following firm equities in Asia.

EUR/USD trades 1.2930 (range 1.2878/1.2943); EUR/JPY met selling just below the key level of 113.50 (range 112.59/113.47) but has remained well bid during the last few hours.

USD/JPY, CABLE & USD/CHF have had an unevenful session currently trading 87.66, 1.5463 and 1.0535 with narrow ranges; CABLE’s strength from friday is underpinning the sterling crosses.

AUD/USD ranged 89.27/82 and came off the upper range some 20 pips with the soft PPI as did AUD/JPY ( range 78.04/73) ; currently 0.8957 and 78.53 respectively; Australian CPI on wednesday will confirm whether or not the RBA are likely to move on rates – unlikely if CPI follows the PPI result. 0.9000 has barrier interest on the topside with stops above

Nikkei has lost some of it’s early gains as we open after lunch, up 0.8% on the day; GOLD 1193.3 and OIL 79.13

I expect the European session challenge will be to test the resolve of the selling interest in EUR/JPY – beware large stops above 113.50 and 114.00