The forex trading headlines from the european morning session

  • German producer prices m/m -0.1% vs +0.2 exp.+0.8% prev y/y +1.2 % vs +1.5% exp +1.7% prev
  • Cyprus fin min says he hopes for russian loan extension today
  • Cyprus int min says no chance of exiting eurozone
  • Eurozone current account jan sa + eur14.8bln vs + eur16bln dec. nsa -4.5bln vs +29bln dec
  • UK MPC minutes vote remains at 6-3 to keep QE on hold
  • MPC minutes reveal more QE could be misinterpreted as lack of commitment to inflation through” unwarranted depreciation of sterling”
  • UK claimant count feb -1.5k vs -5k exp -12.5k prev
  • UK unemployment rate unchanged at 7.8%
  • ECB’s Asmussen says no other country would need deal like cyprus
  • German think tank RWI doubles its growth forecast to +0.6% from +0.3%
  • German chancellor Merkel regrets rejection of bailout plan for Cyprus
  • Berlusconi says only a govt combining his coalition with centre-left will solve problem in Italy
  • Euro climbs on talk of Cyprus Popular Bank being bought by russian investors for euro 4 bln
  • UK budget speech up at 12.30 gmt

In what was always going to be a lively morning the main attention has been on the pound rather than cyprus after a large sell-off in GBPUSD broke down through previous strong support at 1.5080.

A combination of us investment house and uk clearing bank were cited as the prime movers with the view that the vote to keep QE on hold would be reduced to 5-4 from 6-3. Cable hit lows of 1.5026 from 1.5090 forcing EURGBP up to 0.8580 where large sell orders were lined up.

Come 09.30 gmt so came the sharp reversal as the vote remained at 6-3 and as importantly the minutes revealed that further qe was ruled out in case it should be misintepreted as a lack of commitment to inflation due to “unwarranted depreciation of sterling”. The rebound wiped its feet at 1.5100 and 0.8550 respectively but was soon surging further as the minutes were fully digested and relayed. Cable has so far run into large sell orders at 1.5160 while EURGBP has good buying interest again around 0.8530.UK employment data came in on expectations and had little impact.

EURUSD saw some early sovereign buying at 1.2890 and rallied to 1.2910 before falling back again but has since traded in a 1.2900-30 range with decent sell interest on top. Breaking higher now as I type on news that russian investors have bought Cyprus Popular Bank for euro 4 bln.

Yen pairs have also been generally bid all morning on the back of the euro demand with USDJPY climbing to run into offers at 95.50 with talk of a very large option expiry today at 95.20. EURJPY has eventually take out strong sell interest at 123.45 to post highs now of 123.87.

The session has been volatile and it’s not going to change anytime soon, with ongoing cyprus risk, uk budget up shortly, and the latest fomc decision later.