The initial reaction to the Chinese GDP and CPI data was very muted but the European open saw some very aggressive selling of EUR/JPY in particular from big hedge funds as rumours swirled about an impending CNY revaluation of up to 5%. Comments from EU commissioner Olli Rehn which mentioned possible legal challenges in Germany to Greek aid added to the risk-off sentiment. The increasing Greek/German spread did not help matters.

EUR/USD opened this morning at 1.3630 after a subdued Asian session but the heavy EUR/JPY selling managed to work through bids around 1.3610/20 and then trigger stops below 1.3600 and again below 1.3585. More stops were tripped below 1.3550 as the market tried to trigger EUR/JPY stops below 125.70 but this attempt failed. The EUR/USD bids every 5 pips below 1.3530 were reportedly very heavy. Range: 1.3520/1.3635

USD/JPY fell from 93.35 to a session low of 92.89 on the back of the CNY revaluation rumours and the heavy EUR/JPY selling. Heavy bids are reported at 92.50. Ranges: USD/JPY 92.89/93.38; EUR/JPY 125.84/ 127.27

EUR/GBP had already started falling in Asia and it continued into early Europe as traders looked to close the gap from Monday morning, down to .8770. This meant that the cable was immune for a while from the events in EUR/JPY but once it broke below 1.5450, intraday and trailing stops saw it playing catch up. Ranges: cable 1.5387/1.5520; EUR/GBP .8769/.8804.

The AUD/USD has been very subdued despite all the Chinese related news and rumours and the USD/CAD has also lacked interest. Ranges: .9308/53 and .9953/1.0006

Markets: Dax and FTSE are flat. Gold has slipped 0.5% in line with the lower EUR/USD.