• ECB’s Bini Smaghi: Removal of rigid fx policies in Asia, particularly China, would benefit all. Domestic case for appreciation of yuan has become harder to argue post crisis
  • French EconMin Lagarde: Unemployment will continue to rise in 2010 despite better growth prospects, but job destruction should ease in second half of year
  • Shanghai share index up 1.2%
  • Kraft raises cash component in Cadbury bid by 60 pence per share. Plans to sell N.American pizza unit to Nestle. Nestle says it will not be bidding for Cadbury
  • Cadbury: Kraft bid still derisory
  • SKorea fx authorities bought estimated $2 bln plus to stem won’s gains Tuesday
  • French December consumer confidence falls t0 -31 from -30 in November, worse than median forecast of -29
  • German December s.a. jobless -3k, slightly better than median forecast +5k. Unemployment rate steady at 8.1%. Jobless total 3.421 mln
  • Fitch: Expects Japan’s debt to GDP ratio to rise over next couple of years, but Japan’s credit risk being offset by strong external balance
  • Japan’s FinMin Fujii says he wants to quit due to ill health, but PM Hatoyama has aske him to stay
  • UK December construction PMI 47.1, up fractionally from 47.0 in November, but weaker than median forecast of 47.8
  • Euro zone December inflation +0.9% y/y, exactly as expected

The USD has seen some improvement after early weakness in a busy morning session.

EUR/USD started around 1.4440 and rallied early reaching a session high 1.4483 where it ran into determined Middle Eastern selling. We’ve been all the way down to test 1.4400/05 support which has held and we’re presently back up at 1.4425. Russia and real money accounts have been notable buyers in the low 1.44’s.

Cable started around 1.6105 and rallied to test technical resistance at 1.6150/55 which held and it was downhill from there. Sterling hasn’t been helped by a EUR/GBP buy recommendation from a US inverstment house and PIMCO’s recent pronouncement that it intends to be a net seller of gilts this year.

Not surprisingly there were reports of a US investment house selling cable/buying EUR/GBP.

We reached a session low of 1.5989 but reports of Asian central bank buying “around” 1.6000 and buy orders at 1.5980/85 have provided much-needed support and we’re presently back up at 1.6020.

EUR/GBP is up at .9000 from an early .8960 having been as high as .9013. US investment house target on its recommendation is .9150, stop .8850 apparently.

USD/JPY is at 92.05 from early .91.85 in subdued trade. Buy orders noted down at 91.50/60, sell orders layered at 92.30 up through .92.80.