LONDON, Feb 3 (MNI) - A moribund Asian session due to the start of the Chinese New Year was followed by an attempt at a euro-dollar rally in Europe, triggering some further selling through crosses and leaving sterling the major beneficiary.
A stellar UK services PMI survey gave the pound a further boost, sending euro-sterling reeling towards stg0.8470.
Dollar-yen remained bid - assisted by sterling-yen demand from leveraged accounts and the strong PMI. Aussie continues to defy gravity despite the cyclone and softer gold prices, boosted in Asia by strong Aussie-kiwi buying following poor NZ unemployment data overnight and currently eyeing a reported $1.0150 barrier.
EURO SUMMARY: Opened $1.3810 after a late NY sell off to $1.3767. Start of Chinese new year left traders reluctant to get involved and the pair traded a tight $1.3783-3818 range. Early rally in Europe faded at $1.3826 and prompted some cross selling with euro-sterling falling to stg0.8516 with some sterling demand in yen and Swiss crosses. Stops were tripped through stg0.8515 and move accelerated on the very strong UK services PMI through stg0.8500 to a low of stg0.8471 before rallying back in to the stg0.8480's. Euro-dollar has bids down to $1.3870, stops positioned on a break of $1.3765 and further bids at $1.3725/45. Strong sell orders remain $1.3830/40. Cross has some support stg0.8466 EMU PMI and EMU retail sales had little reaction to rates despite poorer sales. Focus now is on the ECB outcome today, where rates are expected to remain on hold but interest on ECB President Trichet's comments. The last few days have seen a strong rise in the euro and should Trichet's comments fail to gain traction, the euro could well be prone to a corrective sell-off ahead of tomorrow's US payroll data.
US: Press pick ups,
*US PRESS: US companies contending with rising commodity prices are stockpiling rubber tires, cotton clothing and other goods, a maneuver that is aimed at insulating them from inflation but also could contribute to it, the WSJ reports.
*US PRESS: State prosecutors in the US are getting help from an organized group of whistle-blowers in a widening investigation into whether banks overcharged public pension funds by tens of millions of dollars for forex transactions, the WSJ reports. The whistle-blowers, who are using Delaware shell companies to remain anonymous, are helping with investigations into the issue by attorneys general in California and Virginia, according to court documents and people familiar with the matter, the paper says.
EUROZONE: Reported comments from eurozone officials,
*FRANCE: Comments from France Fin Min Lagarde -- Need monetary system forum that includes China -- Must address capital flow shocks in EMS -- Regulation of commodity markets lags financial markets -- Must take honest look at role of speculators. -- Friday EU summit on energy, not debt crisis. -- Financial transaction tax can be effective. -- EFSF must be fully effective, flexible. -- Demand for EFSF bonds showed confidence in euro.
*FRANCE FINMIN: Hope for Egypt transition "in short order" -- Oil price rise a symptom of lack of stability -- Clearly an economic concern on Egypt instability -- Level of oil reserves is good -- Financial transaction tax can be effective
EUROZONE: Data released in the eurozone,
*EMU: EMU January services PMI rises to 55.9 (flash 55.2) vs 54.2 in December. EMU composite PMI came in at 57.0 (flash 56.3) versus 55.5 in December - highest since April 2010.
*IRELAND: Irish January services PMI rises to 53.9 vs 47.4 in December, with the new exports sub-index at 55.1 vs 49.7 in Dec.
*SPAIN: Spanish January services PMI rises to 49.3 (47.0fcst) vs 46.2 in December, Jan services PMI highest since July.
*ITALY: Italy January services PMI falls to 49.9 vs 50.2 in Dec, the first sub-50 read since July 2010.
*GERMANY: Germany January services PMI rises to 60.3 (flash 60.0) vs 59.2 in December. (Rtrs)
*FRANCE : France January services PMI rises to 57.8 (flash 57.1) vs 54.9 in December.
*EMU : Retail sales volumes in the Eurozone fell for the fifth time in a row, dipping 0.6% on the month in December. As a result, the annual change came to -0.9%, the first year-on-year fall since November 2009. -- EMU December retail sales m/m below MNI median fcast (+0.4%) -- EMU November retail sales rev -0.3% m/m (-0.8%) -- EMU 4q retail sales -0.7% q/q, 3q +0.4%, 2q -0.1%
EUROZONE: Press pick-ups in the eurozone,
*IRELAND: Deposit flight from Irish banks accelerated sharply at the end of last year on fears of political turmoil, suggesting that the EU-IMF rescue package for Ireland failed to restore confidence, the Telegraph reports. Irish central bank data showed losses of E40bn in deposits from the key banks in December, compared with E27bn a month earlier, the paper says.
JAPAN: Press pick-ups in the Japanese press,
*JAPAN PRESS: Nippon Steel Corp and Sumitomo Metal Industries Co will merge their operation in around 2010, the Nikkei reports in its evening edition.
YEN SUMMARY: The dollar failed to hold onto yesterday's spike to Y81.86
New Year begin with low volumes due to the holidays. Demand from Japanese investors and importers into and through the fixing kept the pair buoyed into the European session but failed to break past Y81.71 in a further dead session. Talk of bids Y81.35, with stops Y81.30, Y81.00 and Y80.90. Offers Y81.80 up to Y82.00. Euro-yen was uneventful in a Y112.53-74 range with the sterling-yen cross similarly caught between Y131.96-132.30. UK Clearer demand took stg-yen sharply higher in early europe from Y132.22 to Y132.63 and a strong UK services PMI shot the cross to Y132.95 before easing to Y132.70. Euro-yen rallied to Y112.87 in early Europe but was then clumped by retail sellers to Y112.40, before returning to Y112.70. Focus is now on the ECB and tomorrow's NFP number for direction.
