• Shanghai share index ends down provisional 2.3%, lowest close in 3 weeks
  • Germany’s Merkel: Crisis has not been overcome. Tough talks ahead to agree international timing of exit strategy. Every euro member responsible for own fiscal policies
  • Italy Q3 s.a. jobless 7.8% vs Q2 7.5%, higher than median forecast of 7.7%, highest since Q2 2005
  • UK November retail sales -0.3% m/m, +3.1% y/y, demonstrably weaker than median forecasts of +0.5%, +3.7% respectively. Lowest monthly rate since May
  • Swiss ZEW investor sentiment 54.0 in December after 56.4 in November
  • Greek Q3 unemployment at 9.3%, up from 8.9% in Q2
  • China central bank’s Zhu: U.S. dollar depreciation to continue. Getting harder for foreign governments to buy U.S. treasuries
  • UK CBI retail sales balance +13 in December vs +13 in November, vs median forecast of +11

Busy morning. Sterling weakness main feature.

Cable is down at 1.6115 from early 1.6250 having been as low as 1.6081. EUR/GBP is up at .8910 from early .8890, GBP/JPY down at 144.90 from early 146.45.

Cable was under pressure early, undermined by decent-sized sales of GBP/JPY by a UK clearer. It stood just above 1.6200 on the release of much worse than expected UK November retail sales (see above). Well noted stops just below 1.6190 and again just below 1.6150 were tripped in quick succession post release on the way to 1.6081, before partial recovery.

EUR/USD started around 1.4400 and initially edged higher, bolstered by BIS and Middle East buying. However it was only a temporary reprieve and soon the pairing was back below 1.4400, an Asian sovereign a notable seller above 1.4400.

The sharp sell-off in cable post retail sales release helped push EUR/USD down further, with a session low 1.4536 posted. We’ve recovered slightly to 1.4355. The market will have noted Chinese central banker Zhu’s assertion that U.S. dollar depreciation to continue .

USD/JPY sits at 89.95, marginally easier on the day. Aggressive GBP/JPY selling and ongoing Japanese exporter interest to hedge around 90.00 have helped limit the upside.