• Trichet – Current developments demonstrate the need for countries to reverse past imbalances and competitiveness losses and attain fiscal sustainability as a matter of urgency
  • German FinMin: Could have financial transaction tax in Europe or just EZ
  • UK April PSNB 9.955 bln STG (Cons. 11.0 bln) vs 8.826 bln STG Apr 2009, Highest Ever for April
  • IFO May German Index 101.5 vs Reuters Consensus 102.0
  • Market EZ May Flash Composite PMI 56.2 (57.0 f’cast, 57.3 in April)
  • German May Flash Composite PMI 55.5 (April 59.3)
  • French May Flash Composite PMI rises to 60.5, 45 month high
  • German Bundestag Approves Bill On German Participation In EZ Rescue Package
  • Euro Zone March S/A Current Account EUR 1.3Bln (-4.5Bln pvs)

We have seen a thousand comments from various EU and Japanese officials but none of them were market moving….ditto economic data. Today has been a continuation of “risk reduction” with most of the action witnessed earlier today in Asia.

EUR/USD has traded a broad 1.2455-1.2673 range so far today; last at 1.2500. European range 1.2470-1.2622. Asia took out the stops above 1.2620 but once the move was over the pair drifted off. This became a flood in early London but the pair based above important support at 1.2450 and has been content since to trade mostly in the low 1.25s.

USD/JPY has traded a moderate 89.03-90.49 range so far today; last at 89.95. European range 89.77-90.49. The pair bounced savagely off the lows in Asia this morning as AUD/JPY and EUR/JPY recovered strongly. AUD/JPY was up 5% at one stage after being down 8% at one stage yesterday. Kampo reportedly on the bid at 89.00.

GBP/USD has traded a 1.4330-1.4475 range so far today; last at 1.4355. European range 1.4355-1.4463. Buffeted by EUR/GBP moves but has generally held its own on corporate demand despite the volatility witnessed in other pairs.

AUD/USD has traded a broad 0.8088-0.8373 range so far today; last at 0.8305. European range 0.82221-0.8326. We saw a whopping near on 300 point range in Asia. The pair had closed in NY 0.8160ish and was sold by a US IB in quick time on the open to the days low only to reverse savagely back above 0.8200. Traders suspected intervention due to the swiftness of the move but Australian banks said and emphatic NO. The pair continued to rally with AUD/JPY correcting 5% after falling 8% yesterday. The pair ran out of steam before 84 cents and an early Europe sell-off to 0.8220 bought out the buyers.

Stocks Nikkei down 2.4%, Sydney down 0.4% (was down +3.0% at one stage), Shanghai up 1.0%, FTSE down 1.2%, Dax down 1.6%. US futures spent most of the day in the black with the S&P 500 up 0.7% at one stage…..in the last two hours they have all moved back into the red by about 0.3%.

Gold was sold hard in Asia down to $1166 an ounce but is back above $1182 as Europe unwinds the early move.