• BOJ’s Miyao: To continue providing ample liquidity to markets
  • Bank of England minutes: MPC voted 8-1 to keep policy steady in Sept. Some MPC thought probability that further monetary stimulus would be needed had increased
  • US treasuries extend gains. 2-year t-note yield hits record low 0.407%
  • Euro zone July industrial orders -2.4% m/m, +11.2% y/y. Demonstrably weaker than median forecasts of -1.1%, +16.3% respectively
  • Hungary State Sec: 2011 budget deficit to be around 2.8% of GDP
  • Dubai needs no more support from UAE central bank – Senior Dubai official
  • Irish/German 10-year govt bond yield spread 12 bps wider at 416 bps. 5-year cds rises to record high of 463 bps

Its been a poor morning for the US dollar and sterling. Guess it’s something to do with growing speculation further QE is in the offing for both countries.

Its been an extremely hectic morning and its certainly not been one-way traffic, with price action very choppy to say the least.

EUR/USD up at 1.3370 from early 1.3295 having been as high as 1.3398. EUR/USD edged higher initially and ran into selling by China above 1.3300, but this didn’t stop the euro from advancing further. We got to 1.3330, just shy of well-noted 1.3334 August high and that’s when the sellers came out from behind the rocks.

A sharp dip in European stocks (said to be execution of 1.5 bln euros programme order to sell European stocks) then helped pressure EUR/USD back below 1.3300 again. BIS bought around 1.3290 and again around 1.3275 helping limit the damage.

We were soon back above 1.3300 and the euro kept rallying despite very poor euro zone industrial order data (see above), which was a sign of what was about to occur. A well known US investment bank doing God’s work was notable buyer as stops above the aforementioned 1.3334 got tripped and we quickly moved toward 1.3400, where barrier option interest was noted.

A decent Portuguese bond auction helped the pairing make 1.3398 session high before slipping back. China was reported protecting barrier. BIS (nice profit!!) and Russia were also notable sellers above 1.3380.

Cable unchanged at 1.5650. EUR/GBP up .8540 from early .8490. Sterling got hit hard on release of BOE minutes for September MPC meet, which suggested further QE could be on the cards (in the cards if you live in the States) Asian sovereign buying had been noticeable earlier this week at lower levels and today there were reports of Asian sovereigns selling up around 1.5700.

USD/CHF down at .9891 from early .9975 having been as low as .9872. Big German very noticeable seller early. Stops were tripped on move through .9910.

USD/JPY down at 84.58 from early 84.83 and this despite reports of BOJ buying at 84.75. One only has to look at US treasury yields to see the factor at play there.

AUD/USD up slightly at .9573 from early .9557, but selling by semi-official name up around .9580 has helped limit gains.