• Moody’s analyst: US government needs to articulate credible fiscal consolidation plan. If US budget debt projections realized, would need to review rating – WSJ
  • Gov Schwarzeneggar declares state of emergency over California’s finances
  • UK Nationwide house prices -0.5% m/m, +6.6% y/y, weaker than median forecast of -0.3%, +7.0% respectively
  • French producer prices flat m/m vs median forecast +0.2%
  • German July jobless change -20,000 m/m, exactly in line with median forecast. Jobless rate down t0 7.6% from 7.7%, again as expected
  • UK June mortgage approvals 47,643, down from 49,461 in May and below median forecast of 49,000
  • Euro zone July economic sentiment 101.3 vs 99.0 in June, some way better than median forecast of 99.0
  • PBOC advisor: Under current fx regime, yuan can rise or fall, but only in small steps

Things have hotted up a bit today, with the grrenback experiencing across the board losses. Asia had already hit the US currency a little overnight, in reaction to the news Californian Governor Schwarzeneggar had declared a state of emegency over the state’s finances.

The dollar then got hit again as traders became aware of an interview by Moody’s analyst in today’s WSJ. The analyst raises the spectre of the US losing their AAA sovereign debt rating. (see above)

EUR/USD sits up at 1.3080 from early 1.3010. Bank of Korea was a very notable buyer early and managed to get it up to test well touted 1.3050 barrier option interest. The BIS bought in the 1.3020/25 area helping the cause.

Talk had China selling just ahead of the 1.3050 level and also large US investment bank (the one doing God’s work). They seemed to winning the battle, well that’s until word of the Moody’s analyst interview began to circulate.

The 1.3050 barrier gave out in the blink of an eye and we’ve been as high as 1.3090 so far. Decent selling by the Reserve Bank of India up around 1.3080/90 has helped slow the upside move.

Much talk of major Swiss player actively buying 1 week eur/usd calls with a 1.3250 strike.

USD/JPY down at 86.85 from early 87.20 in line with general weaker dollar tone. We got as low as 86.75 where the BIS emerged as a buyer lending much needed support.

AUD/USD up at .9035 from early .8960. There has been much talk in the market of huge month-end demand for aussie. A US investment bank (NOT the one doing God’s work) was said have been very notable buyer this morning.

Swissy BIG gainer this morning. EUR/CHF down sharply at 1.3655 from early 1.3740. The swissy gains come amid rumour the SNB is preparing to hike interest rates in September. USD/CHF down sharply at 1.0435 from early 1.0555.

Cable up at 1.5640 from early 1.5620. Reserve bank of India has been decent seller of the pairing above 1.5640, helping limit gains. Poor UK house price/mortgage approval data has also proven a drag on sterling.

EUR/GBP up at .8365 from early .8330. Obviously traders will be aware it’s month end and will be expecting the usual European central bank buying of the cross to emerge today or more likely tomorrow.