• German ECB managing board member and chief economist Juergen Stark resigns in protest over the central bank’s buying of bonds of highly indebted euro states
  • German/France push financial transactions tax in letter to EU
  • Bloomberg: ECB waters down plan to wean addicted banks off of ECB liquidity
  • Rumors of weekend default by Greece hit EUR/USD early in session; subsequently denied by Greece
  • Reuters reports German deputy FinMin Asmussen to replace Stark on ECB board; he has no prior central bank experience
  • G7 sources say ministers say may issue communique on the global economy but make no reference to coordinated interventions. Earlier said would not issue communique
  • Canadian FinMin: Greece may have to leave euro if does not keep budget cutting plans
  • UK Treasury: Will not take part in any financial transactions tax
  • Germany readies plan to shore-up banks if Greece defaults
  • Greece fully committed to bailout agreement: FinMin
  • Fed’s Bullard: Main questions is whether to ease further, QE3 most potent weapon Fed has
  • Australian trade minister: Will not intervene to weaken AUD
  • S&P 500 falls 2.7% to 1154; Dax falls 4%
  • US 10-year not closes at 1.92%, down 5 bp.
  • EUR/JPY falls to lowest level since 2001 at 105.30

EUR/USD opened low and closed lower, sliding from about 1.3840 to 1.3627 on the shock resignation of the German ECB chief economist in protest over the buying of crappy euro zone debt. In less than two months, the ECB will have a new president and a new German managing board member with no central banking experience, if early reports of Asmussen’s appointment are true. Scary stuff amid the high probability of Greece eventually being forced to default.

Real money players were very heavy sellers of EUR/USD throughout the session, using less well-followed fixes every half-hour to dump more euros. The 15:00 GMT fix was a bit of a blood bath.

We penetrated the 61.8% retracement of the 1.2860/1.4940 at 1.3655, falling as low as 1.3627 before a violent short-covering rally on the Greek default denial. We end just above that Fibo support.

Safe-haven currencies showed some life today as EUR/CHF fell sharply from 1.2187 at the US open to 1.2056 on the European close. USD/JPY slumped from 77.75 to 77.10 at the European close but edged back up to 77.60 ahead of any possible G7 communique.