LONDON SUMMARY

London saw below-average activity in continued selling of the JPY crosses, following Asia’s lead on the back of a couple of news clips. The first, as discussed in the Asian update, was related to talks of Japan setting up a state investment fund. The second piece of news was the debt rating upgrade of Japan. Standard & Poor’s announced a one level rise to AA, bolstering the Japanese currency. (S&P is a financial services company that rates stocks and corporate and municipal bonds, among other entities, according to risk profiles.)

USDJPY traded off the 118.70 level to the 118.35 support zone. The JPY crosses stayed heavy, with EURJPY lower by another 30 pips from Asian lows. In other majors, EURUSD and Cable saw a day of retracement after a steady uphill climb the past few weeks. EURUSD was heavy once under the 1.3580 level, and Cable was a fast mover once under 2.0000 only to be supported around 1.9975. Look for the next big level in the pair to be 1.9950 if this retracement extends further.

On the news front in the London time zone, we saw UK Money Supply released with a firmer than expected reading. UK March M4 money supply rose to +1.0% MoM and +12.8% YoY from Feb's +0.9% and 12.7% respectively. The market had been expecting a gain of 0.8% in the month and 12.5% in the year. The action following the release was fairly muted on the data as this was seen as a second tier number in the market.

There was some chatter from a few ECB officials during the session, with Constancio, Draghi, and Garganas all hitting the newswires.

Ø Mario Draghi, Italy's governor on the European Central Bank, warned that there is a need to be 'very vigilant' on Eurozone inflation risks, stating that monetary policy is still accommodative and it’s vital to anchor inflation expectations.

Ø ECB Governor Vitor Manuel Ribeiro Constancio said it is vital to be alert on Eurozone inflation risks, with wage talks now being critical to the ECB's view of inflation risks. Constancio is the head of Portugal's central bank.

Ø Garganas joined Constancio in his observation of the Euro's strength, suggesting that the stronger currency may weaken the case for further rate hikes. Nicholas C. Garganas is the Governor of the Bank of Greece.