• World Bank says global recession this year will be deeper than initially predicted. Cuts global growth forecast to -2.9% from -1.7%
  • German FinMin: German industry to remain weak in Q-2
  • ECB’s Nowotny: Doesn’t see a likelihood of rate changes this year
  • Italy April industry orders adj -3.7% m/m vs -2.7% in March, -32% y/y
  • German IFO business climate index rises to 85.9 in June, better than median forecast of 85.0. Expectations index 89.5, better than median forecast 87.0. Current assessment index 82.4, below median forecast of 83.0
  • Ifo’s Abberger: Would not describe latest IFO rise as turning point in economic trend. IFO rise is driven by better business expectations, current situation remains bad
  • Ifo’s Abberger: Main issue for German firms is foreign demand, more so than oil price, level of euro
  • OECD’s Gurri: For first time economic forecasts will be better than previous ones (due Wednesday)
  • IMF Chief Economist: Fiscal stimulus probably essential for next year or two, before phasing out. Not enough economic signs to ensure a strong recovery, sees risk to downside.
  • IMF Chief Economist: Sustained US recovery needs to come from export boost, may require dollar adjustment
  • BUBA: Does not expect to see German economy bottom before mid year. Signs of recovery in foreign demand are weak, domestic demand suffering from weak investment

Risk aversion has been raised a couple of notches, with stocks oil etc turning lower. This has benefitted likes of dollar and yen at the expense of euro, aussie and canadian dollar. Sterling has held up surprisingly well against this backdrop.

EUR/USD is down at 1.3850 from an early 1,3900, having earlier posted a session low 1.3835. Obviously heightened risk aversion hasn’t helped euro’s cause. Some also point to a WSJ article entitled “Germany is expecting major budget shortfall” as an underminning factor, while others suggest caution ahead of ECB’s long-term refinancing operation which gets underway Wednesday.

The euro failed to ellicit any meaningful boost from the generally better than expected IFO data, but it probably provided a modicum of underpinning.

When all said and done, we’re still stuck in the well-defined 1.38/1.40 range (ok we popped out the topside Friday, but what’s 10 points or so among friends)

Cable ends the morning pretty much where it started off, namely around 1.6460. It’s traded rather choppily in a one cent range. Disappointing UK house price data doesn’t seem to have overly underminned the currency, neither a rather cautionary article by Roger Bootle in The Telegraph.

USD/JPY narrow rangebound, all but unchanged on day at 95.95.