A preference for safe haven assets has been clear in the wake of the two bombings in Indonesia overnight although the moves have lacked aggression, with a moderately better tone in stocks tempering sentiment.
GBP/JPY has been one of the greatest movers overnight. Sterling has been pressured by the general risk aversion strategy but the move has been emphasised by a UK press report which refocuses attention back on the UK's worrisome outlook for debt. Data this morning has been limited. Italian industrial orders for May at +0.4% m/m showed signs of stabilisation.
The Eurozone posted a second successive trade surplus in May, though this incorporated a 2.7% m/m s.a fall in exports and a 2.8% m/m sa fall in imports.
The move into safe haven which has been extended on the news from Indonesian overnight was already in motion during yesterday's NY session as the concerns about CIT provided a strong reminder of recessionary conditions that still encompass much of the global economy.
EUR/JPY, a stalwart bellwether of risk appetite forged lower in initial Asian hours before making a recovery. Another fall followed as London traders arrived at their desks before buyers emerged at the 131.80 area.
The Daily Telegraph this morning quoted the IMF as urging the UK government to reverse the rapid deterioration in public finances in order to uphold confidence. It warned that if fiscal sustainability came into question then pressures on sterling could emerge. This story provided no fresh insight, however. The S&P's warnings in May shocked the market into acknowledging the poor position of UK finances; this topic is likely to remain in the headlines increasingly in the run up to next year's general election, likely to be held in May. Cable retreated below 1.6300 this morning before finding support, EUR/GBP has edged higher towards 0.8650.
This afternoon, focus will turn to the earnings reports of BoA and Citibank. US housing starts and permits are due for release as is the Canadian CPI report.
