• Inflation lurks in wings as recovery gets going, warns Andrew Sentance in interview with Guardian
  • Kazakh C.Bank says bought more than $1 bln on forex market this month alone to stop fast tenge appreciation
  • Obama emergency stimulus measures saved up to 2 millon jobs last year – White House’s Romer
  • Shanghai share index down 3.1%, biggest single-day fall in 7 weeks
  • Thai central bank keeps rate policy unchanged at 1.25%, as expected. Current baht level not impeding economic growth
  • French Dec CPI +0.2% m/m, +0.8% y/y, as expected
  • German 2009 GDP -5.0% y/y, weaker than median forecast -4.8%
  • Italy November industry output +0.2% m/m, weaker than median forecast +0.5%
  • UK November industrial production +0.4% m/m, -6.0% y/y, slightly better than median forecasts +0.3%, -6.1% respectively

It’s been a busy old morning on the whole, with sterling and euro doing nicely.

EUR/USD sits at 1.4545 from an early 1.4490, having been as high as 1.4557. It hasn’t all been one-way traffic though. The pairing rallied early to 1.4515 where it ran into heavy selling from a Swiss private bank among others. The market fell back below 1.4500 and dipped further when the German Federal statistics office reported 2009 GDP at -5.0% y/y, weaker than median forecast of -4.8%.

However ACB buying had been noted overnight around 1.4456 and there was talk of buy orders down at 1.4450/60, so it was no great surprise when the pairing rallied back. A UK real money account bought good amounts forcing pairing back above 1.4500 EUR/USD was then in danger of stalling out at the previous 1.4515 session high, but an ACB stepped in buying decent amounts and we were off to the races.

Cable is up at 1.6290 from an early 1.6190, bolstered in no small part by the interview given by Andrew Sentance which raises the probability of an end to QE and possibility of an earlier than expected UK rate hike. UK clearer and ACB were seen buying early.

Then talk circulated that there was good EUR/GBP sell interest, GBP/SEK buy interest lined up for the 09:00 GMT fix and this helped fuel further sterling gains. Better than expected industrial output data lent more support.

Further ACB buying (same name as seen in buying EUR/USD around 1.4515) came in at 1.6230/40 which helped fuel the rally to session high 1.6294.

USD/JPY sits at 91.15, little changed from early 91.10, a fledling rally floundering when it ran into sales up at 91.45/50.

EUR/CHF is up on the day, presently at 1.4785 from early 1.4750, but off session high 1.4804. Talk circulated that BIS had intervened but most have poured cold water on that suggestion. Feeling is that it is just a sign of a very nervous market anticipating SNB action. I even heard talk that BIS had turned round and sold around 1.4800. Go figure.

AUD/USD sits at .9245, very marginally firmer from early .9235. The aussie has been held back by two seperate US investment house rcommendations. One has come out recommending long GBP/AUD possie, other long EUR/AUD possie. Commodities have continued to weaken (corn, oil) in wake of recent Chinese move to tweak monetary policy (higher bill rates/increase in bank reserve ratio)