• German Q-1 GDP (final) confirmed at -3.8% q/q, -6.7% y/y
  • German April import prices -0.8% m/m, -8.6% y/y, weaker than median forecasts of +0.2%, -7.7% respectively
  • German Gfk consumer sentiment index for June 2.5 vs 2.5 in May, exactly in line with median forecast
  • North Korea fires two missiles off east coast – Yonhap
  • French April consumer spending 0.7%, better than median forecast -0.1%
  • BOEs Sentance: Too soon to spot green shoots
  • Dutch May business confidence -17.3 pts after -17.4 pts in April
  • Italy April non-EU trade deficit 76 mln euros
  • Euro zone current account deficit s.a. -6.5bln euros in March vs -7.8bln euros in February
  • Swiss UBS consumption index April 0.92, down from 0.99 in March. Due mainly to decline in new car registrations
  • France’s Sarkozy to make proposal to G8 for talks on oil price between producers, consumers
  • Euro zone March industry orders -0.8% m/m, weaker than median forecast of +0.8%
  • ECB’s Nowotny: ECB can withdraw ample liquidity quickly as soon as economy recovers. Sees neither deflation nor high inflation in forseeable future. Some euro zone countries will see economic growth next year

Risk aversion is heightened today; stocks, oil, copper etc all lower. North Korea’s continued recalcitrance isn’t helping matters. Increased jitters surrounding the state of the German banking sector is also weighing. Likes of euro, sterling, aussie and canadian dollar have given ground, while US dollar, and to a slightly lesser extent, Japanese yen have benefitted.

EUR/USD started off around 1.3975 and slid lower early. An article in The Telegraph highlighting toxic debts held by German banks was very much in focus. It was written by our old mate AEP with a catchy title “German debts set to blow ‘like a grenade.’ The sell-off accelerated when news hit the wires that North Korea had launched another two missiles and EUR/USD posted a 1.3859 low when sell stops around 1.3915 were triggered. Unconfirmed rumours of China/Asian sovereigns buying on way down gave no support.

Cable meanwhile has given up the best part of a full cent, presently at 1.5800, slightly up from a 1.5779 session low.

EUR/USD and cable had been looking stretched recently around 1.4050 and 1.5950 respectively, and the market was in need of a shake out and a period of consolidation. North Korea’s actions and the Telegraph article were the triggers needed for a bout of profit taking.