Better than Reuter’s median forecast of 3.0 bln.

On the minus side though, March trade surplus revised down to 7.5 bln from previous 8.6 bln.

To prepare for G20 meeting, according to spokesman.

You can never have too many conference calls is what I say.

EUR/USD sits at 1.2636, effectively unchanged from when I got in around four and a half hours ago.

Market seems to be following the idiom “discretion is the better part of valour”

Greek election result still seems a total crap shoot to me.

LONDON (MNI) — Construction output fell on the month in April on a
non-seasonally adjusted basis, suggesting a poor start to the second
quarter for the construction sector.

Figures released by National Statistics showed non-seasonally
construction output fell 13.2% on the month in April and by 8.5% on the
year, down from 7.7% in March.

In the three months to April compared with a year earlier, output
was down 6.7% compared with a fall of 4.7% in March.

The second quarter usually has a negative seasonal adjustment
factor which suggests growth would need to bounce back very sharply in
May and June to avoid a negative impact on GDP again, which given the
negative impact from the Queen’s Jubilee seems unlikely on current
evidence.

–London bureau: 0044 20 7862 7491; email: puglow@marketnews.com

[TOPICS: M$B$$$,MABDS$]

TOKYO (MNI) – Japanese Vice Finance Minister for International
Affairs Takehiko Nakao on Friday repeated his warning that Tokyo will
take timely action against a one-sided yen rise that deviates from
Japan’s economic fundamentals.

At a briefing on the Group of 20 summit next week, Nakao told
reporters that he has “no objection” to the recent analysis by the
International Monetary Fund that “the yen is moderately overvalued from
a medium-term perspective.”

Previously the IMF had said the yen’s moves were more or less in
line with economic fundamentals, he noted.

Nakao also said that recent foreign exchange rates have been
“lopsided and do not reflect Japan’s economic fundamentals,” adding
that such moves will hurt business and consumer sentiment and push down
economic growth.

The government will closely watch developments in the currency
market and “will act in timely and appropriate manner.” he said.

Finance ministers from the G-20 advanced and emerging economies
will accompany their leaders to the summit scheduled for Monday and
Tuesday in Los Cabos, Mexico.

tkeditorial@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4833 **

[TOPICS: M$A$$$,M$J$$$,MGJ$$$,MT$$$$]

-Apr Global Goods Trade Deficit Stg10.103bn vs Stg8.734bn Mar
-Apr Total Trade Deficit Stg4.421bn vs Stg2.957bn Mar

LONDON (MNI) – The UK’s trade deficit in goods ballooned in April
to the second highest on record as exports fell sharply on the month,
figures released by National Statistics showed Friday.

While the monthly data are erratic, these figures are particularly
worrying when policymakers have been hopeful that the external sector
would provide a boost to growth this year. It may be that we see some
reversal next month, but this data show a very poor start to the second
quarter.

The global trade in goods deficit widened to Stg10.103 billion in
April from Stg8.834 billion in March, the second widest shortfall on
record and way above the median for a deficit of Stg8.6 billion.

Exports fell 8.6% on the month while imports were down 2.5%.

Exports to non-EU countries were particularly hard hit following a
surge last month in auto exports. The value of non-EU exports plunged
10.3% on the month and imports decline 1.9%.

Exports to European Union countries were also down, by 6.8%,
accompanied by a 3% fall in imports.

National Statistics said that there were falls in key commodities
like cars and chemicals.

Including services, the total trade shortfall widened to Stg4.421
billion, the highest since August 2005, when the data were distorted by
the impact of hurricane Katrina in the US. Excluding this, then the
trade gap was the highest on record and significantly above the forecast
for Stg2.8 billion.

–London newsroom: 44 20 7862 7491; email: puglow@marketnews.com

[TOPICS: M$BDS$,M$B$$$,MT$$$$,MABDS$]

UK DATA: Apr NSA Construction Output Down Sharply
————————————————————————
Non-seasonally adjusted construction output fell sharply in April
following a large rise in March. The m/m drop in volumes was 13.2% and
output was down 8.5% on the year, a worsening from March’s 7.7% fall.
Given the data are non-seasonally adjusted it is difficult to make a
hard assessment of their potential impact on GDP. April usually sees a
drop in volumes but these data seem to point to a weak start to the
quarter.

Widens from  a revised -£8.734 bln in March, second largest deficit on record.

Non EU trade balance -£5.202 bln (exp -£4.18bln) largest deficit since sep 2011.  March was revised to -£4.179 bln

Cable’s steady around 1.5507 despite  the poor data

FRANKFURT (MNI) – European Central Bank President Mario Draghi said
Friday there was no inflation risk in the Eurozone and argued that
efforts to stem the debt crisis must shift from monetary policy to the
political arena.

“Inflation expectations remain well anchored and there’s no
inflation risk in any euro area country,” Draghi said at the ECB
Watchers’ conference here, adding that price stability would continue to
“anchor” the central bank’s policy.

Draghi said the objectives of the ECB’s long-term refinancing
operations “have been broadly met,” since “supply side constraints on
bank credit have been removed.”

But Draghi added: “The full supportive impact of the three-year
LTROs needs time to unfold, so it is too early to draw firm conclusions
about the behavior of a single variable – namely, bank credit to the
private economy – which is influenced by a multitude of factors.”

“The ECB has a crucial role of providing liquidity,” Draghi said.
“This is what we have done throughout the crisis…this is what we will
continue to do. The Eurosystem will continue to supply liquidity to
solvent banks where needed.”

Draghi also said that “should risks to price stability emerge, the
Eurosystem has sufficient tools at its disposal to absorb excess
liquidity.”

Draghi defended that ECB’s enlarged collateral framework, arguing
that market fragmentation and divergence within the Eurozone had
required the Eurosystem to allow some national central banks to enlarge
the collateral pool.

“The collateral enlargement was crucial for addressing a situation
of liquidity abundance in some countries and liquidity scarcity in
others,” Draghi said, adding that “the enlargement has taken place with
prudence.”

“While the process will take time, the restoration of adequate
credit flows and the renewed functioning of the interbank market remain
our firm objective,” the ECB chief said.

But Draghi said the central bank has largely reached the limits of
its mandate, and the need for action in the Eurozone has shifted to
politicians.

“We’ve reached a contingency where political choices have become
predominant over monetary instruments that we can use in the near
future,” Draghi said.

Asked whether he would take back his March comment that “the worst
is over,” Draghi insisted the comment “by and large stands,” though
there remain “serious downside risks here. These have to do mostly with
the heightened uncertainty.”

Draghi said the comment was based at the time on the “dramatic
improvement” seen in credit conditions as a result of the LTROs.

“We still think that funding conditions are way better than they
were in November,” he said.

– Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com –

[TOPICS: MT$$$$,M$X$$$,M$$EC$,MGX$$$,M$$CR$]

LONDON (MNI) – The size of the joint Treasury and Bank of England
“Funding-for-Lending” scheme has not been capped and is dependent on
take up by banks, Treasury Minister Mark Hoban said Friday.

The Funding for Lending scheme was unveiled by BOE Governor Mervyn
King in his Mansion House speech Thursday and it is being designed to
provide banks with below market rate funding in return for enhanced
lending. Press reports talked about the scheme supporting up to Stg80
billion in new loans, but Hoban said in a BBC Radio 4 interview there
was no upper limit.

“We haven’t put a cap on the Funding for Lending,” Hoban said,
adding that the amounts involved would be dependent on take-up.

He was questioned about why the Funding for Lending scheme would
work when the National Loan Guarantee scheme, which was designed by the
Treasury to boost lending to small to medium sized enterprises, appears
to have had little impact.

“What the Funding-for-Lending scheme does is build on the National
Loan Guarantee scheme … that National Loan Guarantee Scheme is
targeted at SMEs, this is to support the whole economy – business and
households,” Hoban said.

In his speech Thursday, King said he hoped the Funding-for-Lending
scheme would be in place within weeks.

It “would provide funding to banks for an extended period of
several years, at rates below current market rates and linked to the
performance of banks in sustaining or expanding their lending to the UK
non-financial sector during the present period of heightened
uncertainty,” King said.

- London newsroom: 00 44 20 7862 7491; e-mail: drobinson@marketnews.com

[TOPICS: M$$BE$]

PARIS (MNI) – The problems of the Eurozone are too big to be solved
simply by cutting official interest rates, European Central Bank
Governing Council member Jens Weidmann said in an interview published
Friday by Italy’s Corriere della Sera and three other European
newspapers.

Asked whether he was willing, if necessary, to break the ECB’s
“taboo” on pushing its main refinancing rate below 1%, Weidmann replied,
“there are very few taboos in the Eurosystem. But once again, we do not
pre-commit.”

However, Weidmann added: “The instability in financial markets
derives from the political uncertainty about the execution of the
[reform] programs in Greece, about the future of the monetary union more
generally. And all of that cannot be solved with a rate cut.”

In addition to Corriere della Sera, Spain’s El Pais, Greece’s
Kathimerini and Portugal’s Publico also participated in the interview.

In the version published by Corriere, Weidmann noted that the ECB
has already “extended its mandate considerably” to bolster the Eurozone,
including with interest rate cuts and ongoing provision of unlimited
liquidity to banks.

“If it came to acting as lender of last resort for governments,
that would spread solvency risks among the taxpayers of different
[Eurozone] nations without democratic legitimacy, which is severely
prohibited by the union treaty,” he warned.

Weidmann rebuffed the call by U.S. President Barack Obama for
policies that promote stronger economic growth. “We must recognize that
the current recession in many countries is the result of a lack of faith
in their public finances tied to an erosion of their competitiveness,”
he said. “There is no easy exit, unless we combat the cause of these
problems. And there is no doubt that the solution does not consist of
increasing public debt through new fiscal stimulus.”

Weidmann lauded the recent agreement to provide as much as E100
billion in EU loans to help re-capitalize Spain’s banks. Spain’s
decision to seek aid, he said, is important “because it reduces
uncertainty about the solvency of Spanish banks and contributes to
stabilizing financial markets.”

The Bundesbank chief also said he appreciated “the fact that the
Spanish government does not expect more financial aid without the
necessary policy of conditionality, because this must be a key element
of all financial aid.”

Weidmann noted that in the debate about creating a banking union,
the ideas of joint deposit insurance and an EU-wide bank resolution fund
both raise the same question about mutualization of debt: the
relationship between joint liability and joint control over policies.

“I agree that the link between governments and banks must be broken
with a banking union,” Weidmann said. “However, it is not a question
that can be resolved in haste, because it requires notable legal
modifications similar to those in a fiscal union, since we would be
assuming considerable joint liability. And this would interfere notably
with national sovereignty and the rights of national parliaments. Nobody
would guarantee deposits for E11 trillion without being sure there is an
effective central control.”

Weidmann noted that the biggest burden in funding bailout packages
weighs on Germany, whose triple-A rating is the “anchor of stability”
without which the bailouts would not work. “So it is too easy to say
Germany always says ‘No’, and it is unjust to say it isn’t playing a
constructive role.”

He noted that in a recent poll, 58% of Germans said they were
likely to support greater political integration with the rest of Europe.
“In other countries, the view is more negative, especially in those that
request more forcefully a mutualization of risks and of debt, like
France, Italy and Spain,” he said.

–Paris bureau, +331-42-71-55-40; bwolfson@marketnews.com

[TOPICS: M$$EC$,M$X$$$,M$S$$$,MGX$$$,M$$CR$,MT$$$$,M$G$$$]

By at least  0.5% in most polls according to CNBC TV, but reports also suggest that as much as 20 % remain undecided in some key cities.

Most see a New Democracy/PASOK coalition as the likely result, but with a very strong opposition in Syriza

• Recent fx movements do not reflect Japan’s economic fundamentals
• Recent yen rise has been been one-sided, reflecting concerns about European economy
• Sees nothing strange in IMF view that yen is moderately overvalued

FRANKFURT (MNI) – European Central Bank President Mario Draghi said
Friday there was no inflation risk in the Eurozone and argued that
efforts to stem the debt crisis must shift from monetary policy to the
political arena,

“Inflation expectations remain well anchored and there’s no
inflation risk in any euro area country,” Draghi said at the ECB
Watchers’ conference here, adding that price stability would
continue to “anchor” the central bank’s policy.

Draghi said the objectives of ECB’s long-term refinancing
operations “have been broadly met,” though their “full impact” needed
“time to unfold.”

As a result: “We’ve reached a contingency where political choices
have become predominant over monetary instruments that we can use in the
near future,” Draghi said.

MORE

– Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com –

[TOPICS: MT$$$$,M$X$$$,M$$EC$,MGX$$$,M$$CR$]

• Integration implies sharing, pooling of sovereignty
• More and more has been elevated to supernational level
• Need for greater legitimacy becomes pressing at certain times
• Stronger economic union would mean closer political union, integration
• Unambigious commitment to price stability helped mitigate impact of crisis

Right that’s enough of Mr Draghi.

Doesn’t seem to be saying anything earth-shattering.  Same old shit, different day.

PARIS (MNI) – France is not seeking to isolate Germany ahead of the
summit of EU leaders at the end of this month, but rather to prepare the
ground for urgent action to stimulate growth, Prime Minister Jean-Marc
Ayrault said Friday.

“On June 28-29, I believe Germany and France, hand in hand, must
find with the other European partners a solution to exit the crisis,”
Ayrault explained in a radio interview. “I’m certain we will find it.”

While France shares German Chancellor Angela Merkel’s wish for a
stronger political and economic union, “we need time to achieve that,”
he said.

“The recession is at our door … in Europe,” Ayrault warned.
Besides measures to control public spending, “we must find the path both
for growth – and that would be a priority – and at the same time the
mechanism to not depend on financial markets.”

Merkel must also tackle this issue, since she needs the support of
the Social-Democratic opposition to ratify the EU fiscal pact, and the
Social Democrats share France’s views on growth, Ayrault argued after a
meeting here this week with SPD leaders.

Yet a “stronger dialog” with Germany is not at all aimed at
circumventing Merkel, he insisted. “That would be a serious political
error and would not lead to any solution.”

“Like [President] Francois Hollande, I am convinced we have a
common destiny,” he said, appealing to Berlin – in perfect German on
French radio – “to give Europe a future.”

Anemic growth also poses risks for France’s efforts to reduce its
public deficit to 3% of GDP next year, since it would undermine
revenues, Ayrault indicated.

Hence the need to hike taxes on large companies and on the rich and
their assets as measure of “justice”, he explained. At the same time,
half of the consolidation efforts would come from controls on spending,
except in “priority” areas like employment and education. The sole new
outlay planned for this summer is the financing of 1,000 new teaching
jobs, he noted.

The government needs to come up with E10 billion in fresh revenues
to hit this year’s deficit target of 4.5% of GDP, the business daily Les
Echos reported Friday.

Besides a hike in wealth taxes this summer, the Finance Ministry is
also eyeing stiffer inheritance levies and an end to tax-free overtime
pay, except for smaller firms, the newspaper said. A new income tax
bracket of 75% for annual revenues of more than E1 million is planned
for September.

–Paris newsroom +331 4271 5540; email: ssandelius@marketnews.com

[TOPICS: M$X$$$,M$F$$$,MGX$$$,M$G$$$,M$$CR$]

FRANKFURT (MNI) – Only Greece can decide to leave the Eurozone, but
the repercussions of such a decision would be worse for it than for the
other member countries, according to European Central Bank Governing
Council member Jens Weidmann.

In a joint interview with Greece’s Kathimerini, Italy’s Corriere
della Sera, and Spain’s El Pais and Publico, the Bundesbank president
also said Greece would be cut off from funding should it decide to not
fulfill the conditions of the bailout funding, thus making it “very
difficult” to stay in the Eurozone.

“If [Greece] unilaterally opted out of the programme, it would mean
that in my view the basis for more financial help will no longer be
given,” Weidmann said. “Greece would have taken its decision but would
also have to bear the consequences. We will all be affected, but my
assessment is that Greece will be worse off than everybody else.”

Weidmann refused to talk about contingency plans or an adequate
firewall size to prevent contagion should Greece decide to leave the
Eurozone. “In any case, we must not allow ourselves to be blackmailed by
a country because of the contagion effects,” the central banker said.

With Greece’s economic outlook deteriorating and the government in
serious danger of running out of money by mid-summer, one high-ranking
Eurozone official told Market News International earlier this week that
Greece could be given a one- to two-year extension to bring its deficit
to acceptable levels.

“But only if there is a stable government,” the source said. “We
then will have to deal with the issue of how this extension will be
financed.”

Weidmann, however, opposed such an idea. “That’s a political
decision that would have detrimental consequences for the Union at
large,” he said.

The central banker commended the progress made in Portugal and
Ireland, adding that they show that “adjustment programmes work.”

“The reforms that have been implemented there have contributed to
reducing unit labour costs and stopped the decline in competitiveness,”
Weidmann said. “We also see the first benefits of this in the current
account deficit. And according to our forecasts, growth should pick up
again in these countries.”

– Frankfurt bureau: +49 69 720 142; email: frankfurt@marketnews.com –

[TOPICS: MT$$$$,M$$CR$,M$X$$$,M$Y$$$,M$$EC$,M$G$$$]

LONDON (MNI) – The Bank of England has unveiled detailed plans for
its Extended Collateral Term Repo (ECTR) facility Friday, offering
liquidity against a wide range of collateral at a minimum bid rate of
just 25 basis points over Bank Rate.

When BOE Executive Director Market Paul Fisher talked about the
ECTR in a speech back in March, he said the minimum bid price would be
125bps over Bank Rate. In the first ECTR, set for June 20, this minimum
has been set at just 25bps over the 0.5% Bank Rate.

Each ECTR auction will be for a minimum of Stg5 billion. The Bank
said it intends to hold an auction at least once a month, normally on
the third Wednesday of each month, until further notice.

The maturity for each auction will be 6 months. When the ECTR was
first floated it was suggested it would be for just one month maturity.

The lower minimum bid rate and extended maturity highlight the
strains the market could come under in coming weeks and the BOE is
attempting to prevent.

Bank of England Governor Mervyn King announced they were activating
the Extended collateral term repo facility (ECTR) in the Mansion House
speech Thursday.

Under the ECTR participants state how much they would like to
borrow at a given price, expressed as a spread to Bank Rate.

BOE Executive Director Markets Paul Fisher has said “The purpose of
the ECTR is to make liquidity available against the least liquid
collateral, to the market as a whole.”

- London newsroom: 00 44 20 7862 7491; e-mail: drobinson@marketnews.com

[TOPICS: M$$BE$]

• BOJ’s pursuing powerful monetary easing, can offer liquidity to calm markets
• EU policy makers need to act quickly  to avert a global financial crisis, European debt crisis is the biggest threat to the Japanese economy
• Japanese financial firms and yen funding market are  the most stable amongst developed nations
• Global CB’s have currency swap lines
• Yen rise  hurts sentiment and corporate profits
• European tensions have increased over the last month.

Translation……..it’s down to the politicans now, not us

• Eurosystem will continue to supply liquidity to solvent banks where needed
• We are not complacent when we say objectives of 3 year LTROs have been broadly met
• Supply side constraints  of bank credit have been removed
• Full supportive impact of 3 year LTROs needs time to unfold
• Inflation expectations remain well anchored
• No inflation risk in any euro zone country
• Should risks to price stability emerge, ECB has tools to act
• General risk aversion dampening interbank lending
• New regulations concerning liquidity penalize interbank lending
• Easing collateral rules helps credit flow to small, medium firms
• Easing of collateral rules was done in a prudent way
• Restoration of credit flows, interbank lending firm ECB objective
• Strengthening euro zone growth potential is crucial
• Growth-friendly composition of fiscal adjustment needed
• Active labour market policy should target certain groups of society
• Reducing current expenditure, taxation needed
• Collectively EU can compete more effectively
• Ultimate objective for euro needs to be defined
• Working with Barroso, Rompuy, Juncker on vision for euro
• Can’t provide specifics on euro vision as it’s in progress (would have thought they’d already have had a vision for euro by now, just sayin)

EUR/AUD’s starting to struggle again over the last 24 hours and has slipped back under the 100 day MA around 1.2610 this morning and in Asia last night.

AUD/USD’s getting some underpinning from the fall and it looks like some longs are exiting the cross now ahead of the weekend Greek elections.  A break down  in the cross through 1.2550 opens a deeper drop towards the Mar 20 lows around 1.2505 .  Initial resistance is seen up at yesterday’s 1.2650/55 highs.

AUD/USD bids  now lie around the 1.0000/10 level ahead of more at 0.9965/75. Offers run from 1.0030 up to 1.0050 with  talk of stops just above ahead of better tech res up around 1.0065/70

AUD trades around 1.0015 with the cross down around 1.2605