• ECBs Nowotny – Dangereous for supervision to get in arms race with markets
  • Moody’s changes ratings for China’s big four banks to stable
  • Moody’s downgrades unguaranteed senior debt of Anglo Irish Bank to BAA3 from A3
  • Moody’s downgrades dated subordinated debt of Anglo Iris Bank by six notches to CAA1 from BA
  • Moody’s expects continued deterioration in the loan book of Anglo Irish that will require government support
  • German FinMIn – If EU states refuse to adhere to deficit reduction steps, should forgo EU structural funds
  • German FinMin says EU stability pact should be given more bite
  • Wal-Mart bids $4.26bln for Johannesburg based Massmart
  • Unilever climbs on agreement too buy US based Alberto Culver

After surging on Friday, EUR/USD has spent most of the day in modest retreat. Option barriers/strikes at 1.3500 kept the wolves at bay with EUR/USD spending the Asian session mostly above 1.3450 whilst it has spent the London morning straddling 1.3450. A down grade by Moody’s (3 notches) of Anglo Irish Banks subordinated debt saw EUR/USD trade at its 1.3425 low but when the market realised this stuff was only worth 10 cents in the dollar anyway, the single currency returned to 1.3350.

USD/JPY had another shot at the NY low in London but ran into a brick wall. Fridays suspected BOJ intervention has been put down to spoofing by Japanese banks and little else – mind you they did a good job. Market still expects the BOJ to intervene on any attempt below 84.00 but below 83.75 we may see a wholesale dumping of long positions built up in anticipation of intervention.

GBP/USD hits its intraday low of 1.5787 in line with the Euro move on the Anglo Irish downgrade. The move was quick and cynical taking a few weak longs out of their position with talk of fix buying that coincided with the dip. Comments from MPC”s Sentance saw the pair marked a little lower but he said nothing that we hadn’t heard before on numerous occasions. After the topside stops were taken out in NY on Friday the 50 odd pip retracement is hardly surprising.

AUD/USD continues to shine with the market all keyed up for another go at parity. The pair hit a fresh 26 month high on the open in Sydney on a cynical stop run (above the NY high) but has been unfazed by moves in EUR/USD and GBP/USD in London today holding its own against the field. Interest rate hike talk perhaps overdone and one suspects there will be disappointment if the RBA does not hike next week (very likely in my mind).

Gold touch $1300 an ounce briefly in the wake of the FT ‘European central banks to halt their gold sales’ story but the market looks a tad long and we may see a modest pullback if it cannot break above $1300 soon.

European bourses are trading modestly in the black, likewise US equity futures.