- Shanghai exchange closes down 4.3%
- German July PPI -1.5% m/m, -7.8% y/y, much weaker than median forecasts of -0.2%, -6.5% respectively.
- Euro zone June current account s.a deficit -5.3 bln euros vs -0.1 bln deficit in May
- ECB’s Weber: German economy unlikely to reach 2008 levels before 2013
- Bank of England minutes: MPC voted 6-3 for raising QE £50 bln in August. King, Besley and Miles wanted more aggressive £75 bln hike
- UK CBI manufacturing order book balance -54 in August versus -59 in July, but below median forecast of -50
Risk off today. Chinese stocks fell lumpy 4.3%. EUR/USD started out around 1.4150 and sold off as losses on the Shanghia exchange accelerated. We’ve been to a session low 1.4086, presently back up at 1.4100. Talk of Asian central bank buying at 1.4090/95 has lent support. 1.4100 and 1.4120 intraday option expiries today.
Cable crushed. Having started off around 1.6550 came under heavy pressure early as Chinese stocks fell. Comments made late yesterday by David Cameron, about possibility of UK debt default hardly helped sterling’s cause.
The sell-off accelerated when stops below 1.6480 were triggered. The pairing stood around 1.6460 when the Bank of England minutes were released. Interesting price action then ensued.
Traders saw the 6-3 vote in favour of further QE and construed incorrectly that the 3 had voted in favour of no further QE. This sent cable fleetingly to 1.6492 (blinked and you would have missed it) before the realisation set in that the 3 had infact wanted greater QE. Cable sold off sharply.
Cable has been as low as 1.6377 before steadying a little, presently at 1.6390.
USD/JPY lower on the day against the backdrop of heightened risk aversion. USD/JPY started around 94.65 in early Europe and was quickly moving lower, the sell-off accelerating when well-touted sell stops just below 94.50 were triggered.
We’ve been as low as 94.15. Sources note buy orders down at 94.00/10, with decent sell stops said to be gathering just below 94.00. Talk of large JPY94.00 option expiry today.