• German May prelim retail sales +0.4% m/m, -2.9% y/y versus median forecasts of -0.1%, -1.1% respectively. 3rd m/m rise in row, 5th y/y decline in row. But annual comparison distorted because one sales day less in 09 than 08.
  • PBOC advisor Fan Gang says China’s current economic recovery is sustainable. Sees China’s exports growing again by year end
  • ECB’s Weber: Doesn’t expect to see economic growth in positive territory before mid-2010
  • Swiss June PMI 41.8, up from 39.8 in May, better than median forecast of 41.0
  • Italy June factory PMI 42.7, up from 41.1 in May, better than median forecast of 42.5, best in 9 months
  • Euro zone final June manufacturing PMI 42.6, up from flash/median forecast of 42.4
  • UK June manufacturing PMI 47.0, up from 45.4 in May, better than median forecast of 46.4, highest read since May 2008
  • UK June factory output index 52.1 versus 48.1. First time above 50 since March 08

New month and European trading has gotten off to a slow start. Risk appetite is in pretty good shape and this is helping to undermine the JPY and USD somewhat. The release of various encouraging European PMI data has helped underpin sentiment.

EUR/USD is presently up at 1.4070 (having been as high as 1.4087) from an early 1.4030, while EUR/JPY is at 136.40 from around 135.90.

EUR/USD trading was very slow early, until China stepped into the market buying around 1.4030 and the pairing popped higher. The rally has been subsequently underpinned by the release of the various encouraging PMI data.

Sell orders are noted up at 1.4100. On the downside, decent-sized option interest noted at 1.4000 (which expires today) Robust defence of said interest expected ahead of expiry.

Sell stops said to be gathered down in 1.3980/90 area. Asian sovereign bids noted down at 1.3950/60.

Cable is effectively unchanged on the day at 1.6440. However cable wouldn’t be cable if we didn’t see some choppy price action. The pairing sold-off about half a cent in very early trade, dippping below 1.6400 briefly.

Cable was soon back above said level though, bolstered by the sudden China-induced pop in EUR/USD. The rally reached around 1.6475 before petering out.

Sources report small corporate demand down at 1.6380/00 now, with sell stops gathered just below there. More buy orders noted down at 1.6350/60. On the topside, sell orders seen at 1.6500/10.

USD/JPY is marginally firmer, up around 20 points at 96.95, the JPY underminned by decent risk appetite.