European Morning Wrap: USD, JPY Firm on Heightened Risk Aversion

• China’s central bank raises reserve requirements by 0.5%
• Swiss National Bank intervenes in EUR/CHF over EBS as cross hits session low 1.4637
• Euro zone Q-4 GDP +0.1% q/q, weaker than median forecast +0.3%
• ECB’s Trichet: Will work with European Commission on proposals for additional Greek measures
• ECB’s Stark: A lot of ideas being discussed for Greece are counterproductive
• French Q-4 GDP +0.6% q/q, slightly stronger than median forecast +0.5%
• Italian Q–4 GDP -0,2% q/q, weaker than median forecast +0.1%
• Germany Q-4 GDP flat q/q, weaker than median forecast +0.2%

The USD and JPY have seen general strength this morning against the backdrop of heightened risk aversion. The move by China to raise the reserve requirements by 0.5% caught the market on the hop.  European stocks have given up decent gains, oil is off over 1 1/2  bucks and gold has been hit hard.
EUR/USD started around 1.3665 and initially edged higher but the rally soon ran out of steam. Sell orders were tipped up at 1.3700/20 and they were never seriously threatened. Ongoing concerns over Greece and the EU’s ability to address the situation are never far from the surface and some weak German and Italian Q-4 GDP data helped to put the pairing under pressure.

The coup de grace came in the form of a triple-whammy, when around 10:00 GMT we first had the news China had raised reserve requirements 0.5%, quickly followed by disappointing euro zone GDP and industrial production data. There was no recovery from that and we’re presently down at 1.3540.
Cable is down at 1.5600 from an early 1.5695 having traded as high as 1.5740 and as low as 1.5584. It’s been that sort of morning. EUR/GBP is down at .8675 from early .8705, with two clearers seen notable sellers today.

USD/JPY having started around 89.70 rallied strongly over 90.00 to reach session high 90.35 only to do a sharp about turn, presently back 89.95 as the jpy saw across the board improvement as risk aversion rose in wake of China’s move.

EUR/CHF little changed at 1.4650. However inbetween we’ve experienced a healthy 1.4637-1.4693 range. The pairing iniitally sold off only to run into SNB intervention. The central bank is said to have intervened over EBS causing a brutal spike higher before falling back.
Bad morning for aussie, AUD/USD down at .8793 from early .8891. Not surprisingly aussie took it on the chin when the China news hit the wires.