• New German poll shows Merkel’s Conservatives able to form centre-right coalition with FDP
  • Current forex moves not rapid, opposed to forex intervention if forex moves gradual, infact strong yen has merits for Japan economy as it increases people’s purchasing power – Japan’s incoming FinMin Fujii
  • Shanghai share index down 1.1%
  • Swiss retail sales up 1.0% y/y in July vs 0.9% rise in June
  • Swiss ZEW investor sentiment indicator jumps to 58.0 in September from 18.6 in August. Record rise and highest value since indicator’s launch back in June 2006
  • UK August jobless claims +24,400, pretty much in line with median forecast of +25k. Unemployment rate 5%, exactly in line with median forecast (highest since Sept 1997.) ILO unemployment for 3 months to July 7.9%, slightly better than median forecast of 8% (highest rate since Sept-Nov 1996)
  • Euro zone August inflation +0.3% m/m, -0.2% y/y, pretty much in line with median forecasts of +0.2%, -0.2% respectively
  • Japanese PM Hatoyama: Thinks he can secure 7 trln yen fund to carry out new policies in 2010/11. Economic outlook unclear

The Japanese yen has seen across the board strength this morning. USD/JPY is down at 90.30 from an early 91.05, EUR/JPY down at 132.55 from around 133.60 and GBP/JPY down at 148.90 from around 149.95.

The trigger for the JPY strength was a series of comments made by the new Japanese Finance Minister Fujii (see above) USD/JPY has been as low as 90.13, with buy orders at 90.00/20 ahead of barrier option interest at 90.00 so far holding the downside. Talk of stops gathered just below 90.00.

EUR/USD at 1.4680 is effectively unchanged on the day. Inbetween the euro bulls managed to take out barrier option interest at 1.4700 and also 1.4710, getting as high as 1.4713 before slowly drifting lower again. The battle just south of 1.4700 was fierce indeed, with heavy Asian sovereign sales noted.

Ongoing EUR/JPY sales will be weighing on EUR/USD.

GBP/USD at 1.6495 is marginally firmer from an early 1.6465. Technical resistance up at 1.6510/20 is so far capping the topside. Here also GBP/JPY sales will be weighing on GBP/USD somewhat.