• Fed’s Fisher: Too big to fail problem must be addressed
  • Japan Govt: Economy back in deflation
  • German Oct PPI flat m/m, -7.6% y/y, touch weaker than median forecasts of +0.1%, -7.55 respectively
  • Shanghai share index down 0.4%, snaps 5 day winning streak
  • German FinMin monthly report: German GDP growth likely to slow in Q4. Euro strength against dollar tending to hurt German firms
  • BOJ Governor Shirakawa: Will keep very low rates. Government view on deflation in line with BOJ outlook on price falls. Dollar rate highly related to investors’ risk appetite. Closely watching dollar rate
  • Italian September industrial orders adj +5.2% m/m, unadj -20.4% y/y, better than median forecasts of +5.0%, -21.7% respectively
  • Germany’s Merkel: EU stability pact may not be questioned, otherwise would be damaging for euro
  • ECB’s Trichet: Too early as of today to declare the crisis over

Whilst likes of European stocks and oil are near as dammit flat, risk trades in forex are being undone, in some cases with a fair amount of haste. The beneficiaries are the JPY and USD.

EUR/USD opened around 1.4915 and in a rerun of yesterday’s action we quickly saw an ACB step into the market selling decent amounts. The entity, the one with the 1.4800-1.5100 dnt interest, was joined by an Eastern European name and a German bank in providing good supply.

The 1.4900 line help for awhile, but the ACB selling was persistent and stops were triggered on move through 1.4900 and quickly through 1.4880. It was only a case then of trying to work out when the ACB would be back to cover and they duly stepped in at 1.4865 and that was the low for the session in place. We’re presently at 1.4870.

Cable started off around 1.6660 and was quickly struggling, weighed down by aggressive sales of the GBP/JPY cross by Japanese accounts (the cross finishing the morning down at 146.70 from an early 148.20.)

There was talk of an Asian sovereign buying just ahead of 1.6600 and that provided support for a while. Eventually though the line gave out and decent stops just below were quickly triggered and cable slumped to the 1.6550 area very quickly.

There was some talk of the same ACB sniffing around again down at 1.6550 and eventually the entity is said to have bought around 1.6540 although this didn’t manage to stem the tide, the weight of ongoing GBP/JPY sales continuing to weigh. Indeed by now sterling weakness was becoming contagious with EUR/GBP marching higher. The cross is up at .9000 from early .8950.

USD/JPY has seen very steady trade, presently at 88.90, hardly changed on the day. While the JPY is seeing good cross the board strength, there may be some wariness of pushing the USD/JPY pair too quickly lower. Traders will have noted Shirakawa’s warning (see above), that the BOJ is watching the USD/JPY rate carefully.

AUD/USD under the cosh, seeing accelerated sales, down at .9110 from early .9195 as risk trades are unwound.