European FX Midday recap

13:47CET

These are the items that have hit the wires and have had a market impact thus far in the European session:

    * ECB’s Trichet: We are calling for maximum flexibility, capacity for euro zone’s EFSF rescue fund
    * ZEW December German economic sentiment index 4.3 vs 11.8 in November, slightly better than median forecast of 4.0
    * German govt official: We will ensure the euro will remain stable in the long-term
    * S&P: If Belgium fails to form new govt soon, a downgrade could occur, potentially within 6 months
    * Swiss govt raises 2011 Swiss GDP forecast to 1.5% from previous forecast of 1.2%. Sees growth of 1.9% in 2012
    * China ForMin: N.Korea agreed with China envoy on need to show “restraint”, promote “denuclearisation”
    * French November EU harmonised CPI +0.1% m/m, +1.8% y/y, as expected
    * Austrian ForMin: EU colleagues “concerned” about euro – Austria press agency
    * UK Nov CPI +0.4% m/m, +3.3% y/y, marginally firmer than median forecasts +0.3%, +3.2% respectively. Highest y/y rate since May

On a market note:

Asian sovereigns bought early setting the tone for the day.  Stops were tripped through 1.3440 and 1.3475 on way to 1.3498.  S&P warning of a possible Belgium downground has slightly deflated the rally.

Cable effectively unchanged on day at 1.5860. Did manage an early rally which topped out at 1.5910.  A UK clearer was a extremely aggressive seller of the GBP/AUD cross this morning and this weighed on cable and sterling in general.  The GBP/AUD cross is down at 1.5845 from an early 1.5940.

USD/JPY down at 82.95 from early 83.45 having been as low as 82.85.   A large hedge fund was a very notable seller of the cross today, apparently liquidating their long position.

More stops now seen through 82.80 but also buy orders clustered at 82.75.

AUD/USD up at 1.0010 from early .9950.  The actions of the UK clearer gave the pairing a good boost.  Australian corporates were also notable buyers today.

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