LONDON (MNI) – The Bank of England’s interim Financial Policy
Committee considered suspending banks’ individual liquidity guidance at
its June 22 meeting as it sought to stimulate bank lending.

The FPC eventually decided against suspension, but the minutes of
the June meeting reveal how far the committee was prepared to go to
boost bank lending.

The FPC finally agreed to ask the Financial Services Authority to
make clear to banks they were free to use their liquidity buffers at
times of market stress. The FPC agreed that banks should be made aware
that their individual liquidity guidance ratios “were not hard floors
and liquid assets were usable in times of market strain.”

“Members considered whether there was a case for going further by
recommending the suspension or easing of current guidance,” the minutes
said.

The FPC thought that suspending the liquidity guidance “might
provide the clearest possible message to banks that they could reduce
their liquid asset holdings.”

The minutes revealed, however, that the FPC believed that there was no
guarantee that easing regulatory guidance on liquidity would lead to a
fall in banks’ holdings of liquid assets.

The drive to allow banks to reduce their liquidity buffers is one
of a raft of initiatives adopted by the BOE to try and ease credit
conditions and stimulate bank lending in the current adverse economic
climate. The FPC minutes reveal the thinking behind the BOE policy.

In other comments, the FPC said they believed banks’ current
capital appeared to be insufficient in the event of an extreme outcome
in the euro zone debt crisis.

–London newsroom: tel: +4420 7862 7492 email:ukeditorial@marketnews.com

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

-Jun Producer Output Prices -0.4% m/m; 2.3% y/y
-Jun Core Producer Output Prices -0.2% m/m; 2% y/y
-Jun Input Prices -2.2% m/m; -2.3% y/y

LONDON (MNI) – Output price inflation fell to its lowest level for
two and half years in June, as petrol prices continued to decline,
figures released by National Statistics showed Friday.

The data revealed a further welcome fall in pipeline price
pressures, and a sharp fall in input prices also suggests further drops
to come. This slowdown in producer price inflation boosts the likelihood
that inflation at the consumer level will ease further over the coming
month, as the Bank of England forecast in its latest Inflation Report.

Producer output prices fell 0.4% on the month and were up 2.3% on
the year, below the median forecast for a monthly decline of 0.2% and
annual rise of 2.4%. The fall between May and June was the sharpest
since November 2008 and the annual rate now stands at its lowest since
October 2009.

The main reason behind the monthly drop was a fall in petrol prices
during the month and also declines in chemical and pharmaceutical and
clothing, textile and leather products.

Core output prices which exclude the effects of changes in food,
beverages, tobacco and petroleum were down 0.2% on the month causing
inflation to ease to 2% from 2.3% previously, the lowest since January
2010.

The softness in output prices looks set to continue as input prices
in June fell 2.2% on the month in June leaving them down 2.3% below
levels a year earlier, the lowest level since September 2009. The latest
monthly drop was mainly due to a 9.1% fall in crude oil between May and
June, the largest monthly decline since December 2008.

Imported metal prices were down 1.4% on the month and by 10% on the
year in June.

Excluding the impact of food, beverages, tobacco and petroleum
input prices fell 0.1% on the month and by the same amount on the year
on a seasonally adjusted basis, the lowest annual rate since September
2009.

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

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

UK DATA: Jun Producer Output Prices -0.4% m/m; 2.3% y/y
–Jun Core Producer Output Prices -0.2% m/m; 2% y/y
–Jun Input Prices -2.2% m/m; -2.3% y/y
————————————————————————
Output price inflation fell to its lowest level since Oct 2009 and
at the sharpest monthly pace since Nov 2008 in June. Output price
declines were below the median forecast while the fall in input prices
was in line with the median. The figures show a further welcome fall in
pipeline price pressures and a sharp fall in input prices also suggests
further falls to come. This slowdown in producer price inflation boosts
the likelihood that inflation at the consumer level will ease further as
the Bank of England expects over the coming months. Behind the output
price fall was a drop in petrol prices and also declines in chemicals,
and clothing. Input prices fell as crude oil prices fell 9.1% between
May and June, the largest monthly fall since December 2008.

They said it could support economic growth as well as ensuring financial stability.

 The newly formed government policy support committee doesn’t get full powers until next year

Lowest since October 2009

Core producer output prices -0.2% m/m, +2.0%.

Lowest since January 2010

Cheaper crude oil prices ain’t it…….

TOKYO (MNI) – International Monetary Fund Managing Director
Christine Lagarde warned on Friday that a deeper debt crisis in Europe
would trigger safe-haven buying of the yen and make the currency even
more overvalued.

She told a news conference that she will stick to the IMF’s latest
view that the yen is “moderately overvalued in the medium term” and
added that worsening developments in Europe would “have an welcome
currency effect on the yen,” with safe-haven flows making it “further
overvalued.”

Lagarde repeated the IMF’s position that Japan’s currency market
intervention aimed at preventing a sharp yen rise from hurting the
economy can be justified if “macro-prudential measures have been taken
and have been exhausted” and if such action is “duly concerted with all
the colleagues.”

Earlier in her speech at a forum here, Lagarde said the IMF will
revise down its assessment of the global economy in an update to its
World Economic Outlook issued in April.

“In the IMF’s updated assessment of the world economy, to be
released 10 days from now, the global growth outlook will be somewhat
less than we anticipated just three months ago. And even that lower
projection will depend on the right policy actions being taken,” she
said.

Asked to comment further on this point, the IMF chief said that the
projections will be “tilted to the downside” and added that the change
is “not an enormous variation but a negative variation.”

She said some regions are more affected by the recent slowdown in
global demand than others but declined to name them.

On news of rate cuts by the European Central Bank and the People’s
Bank of China on Thursday, Lagarde said she was not sure whether the
moves were coordinated but that central banks share the goal of
enhancing economic growth.

Lagarde was here to inspect security, traffic and accommodations in
central Tokyo where the IMF and World Bank will hold their meetings in
October.

She said she discussed global, eurozone and Japanese economic and
policy issues with Prime Minister Yoshihiko Noda, Finance Minister Jun
Azumi and Bank of Japan Governor Masaaki Shirakawa during her visit.

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

[TOPICS: M$J$$$,M$A$$$,MGJ$$$,MI$$$$,MMJBJ$]

• ECB needs to explain its limits of power and madate
• Markets seek reassurance from ECB to safeguard the Euro
• Should focus on ‘what is actually said’
• ECB communication is ‘walking a tightrope’
• ‘Constant extrapolation’ ( thats a big word) sows seeds of volatility
• ECB is ‘engaging more’ and ‘explaining more’ on EU crisis
• Govts need right incentive to tackle challenges
• Announcement of the LTRO was  a ‘sentiment changer’
• Still considerable uncertainty for the longer term

Asmussen was speaking at a conference in Brussels

BERLIN (MNI) – ECB Executive Board member Joerg Asmussen on Friday
said the central bank cannot solve the Eurozone debt crisis on its own,
pointing to the limit of its mandate.

In the draft of a speech delivered at the European Communication
Summit in Brussels, Asmussen noted that the ECB is prohibited from
yielding to outside influence, “and rightfully so.”

“We must explain what the limits of our powers and mandate are,”
the central banker insisted. “The ECB cannot compensate for what others
- notably political authorities – fail to do.”

Asmussen noted that the ECB can change the market situation “within
minutes, by adjusting its interest rate, market interventions if needed,
adapting its collateral rules, or simply communicating its assessment.”

However, for the longer-term, considerable uncertainty remains, he
remarked: “Short-term fixes do not change the structural features of
European economies and markets.”

Those depend on the member states’ economic policies, which take
time to design and implement, the Executive board member reasoned. “Firm
commitments from governments can help reduce this uncertainty, but can
never eliminate it,” he said.

The trade-off between the short term and the long term creates a
fundamental communication challenge for the ECB, Asmussen said.

“If short-term crisis fighting is successful, for instance through
ECB actions, some of the longer term challenges might never be
addressed,” he lamented. “The immediate pressure subsides, and
incentives for governments weaken. More than once did we witness this
during this crisis. By contrast, if the fire-fighting in the short-term
does not succeed, there may not be a longer term to think about.”

The ECB is walking a tightrope in its communication strategy, the
Executive Board member said. Markets need reassurance that the central
bank will do what is within its power and mandate to guarantee that the
euro will not fail. At the same time, governments need to have the
right incentives to tackle the longer-term challenges, he explained.

He cautioned that “there should be no illusion that the ECB can
single-handedly ensure plain sailing for our economies and the markets.
There are limits of what we can do, and what we know.”

Asmussen was speaking one day after the ECB cut its main policy
rate to a record low of 0.75% and its deposit rate to zero. But these
actions were largely a disappointment to markets, which seemed to focus
more on Draghi’s clear attempt to discourage any expectation of
additional long-term refinancing operations or sovereign debt purchases.

Asmussen said markets want to see “immediate and forceful action”
from Europe’s politicians. And “their criticism of the slowness of the
European crisis response is in part justified.”

However, democratic politics takes time, he pointed out: “It is
open, noisy, and messy. We cannot do ‘crisis management by Politburo’.”

Commenting on the European rescue fund EFSF, Asmussen argued that
the options to leverage the fund actually had put off investors rather
than attracted them “because it made the EFSF structure more risky and
less understandable.”

–Berlin bureau: +49-30-22 62 05 80; email: twidder@marketnews.com

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

• Japan sales tax hike plan appropriate in terms of timing
• More measures should be considered to help fix Japan public finances
• Japan yen-selling intervention would be justifiable if it duly consults with other countries

I wonder if the good lady’s bought any new handbags on her visit…….

Getting reports of some fund sales in cable just now as market attempts to targets a reported barrier at 1.5500. Not much joy so far though as EUR/GBP remains soggy and EUR/USD attempts to bounce off the recent day’s lows around  1.2366.

Cable’s in the low 1.5520′s  and there are strong bids sitting in the 1.5500/10 area ahead of the barrier.

EUR/USD sits at 1.2375

What’ll we see first, 1.2275 or 1.2475?

Reason/s always welcome, but not obligatory

–Adds Detail On Tax Revenue In May 2012 Vs. May 2011
–Mid-Year Tax Hikes Aimed At Hitting Public Deficit Target

PARIS (MNI) – France’s central government deficit at end-May
amounted to E69.6 billion, E1.2 billion more than the previous-year’s
level, the Budget Ministry said Friday.

Outlays for the first five months of the year totaled E159.5
billion, E6.8 billion more than a year ago. This was mainly due to a new
financial management system that allowed ministries to hit the ground
running at the start of the year, the ministry explained.

Revenues through May were E2.4 billion higher on the year at E111.2
billion, due in part to the one-off sale of new airways frequencies at
the start of the year.

VAT receipts, the largest source of tax revenue, rose 1.3% from the
previous year to E55.5 billion, while income tax revenues were up 3% to
nearly E29 billion. The government’s corporate tax take dropped 5.0% to
E7.6 billion. Overall tax revenues were up 2% from May 2011 to E105.7
billion. Non-tax revenue rose 13.5% to E4.92 billion.

The ministry noted that the mid-term budget of the previous
government in March had over-estimated tax revenues and that as a
result, the new government of President Francois Hollande had revised
the estimate of business tax receipts down by E3.4 billion and VAT taxes
by E1.4 billion in the supplementary budget it unveiled on Wednesday.
Tax collections at the end of May were in line with these new estimates,
the ministry said.

This shortfall in tax receipts and the absolute necessity of
lowering this year’s public deficit to 4.5% of GDP were the principle
arguments of the new Socialist government for nearly E7.2 billion in tax
hikes in the budget revision announced this week. The full-year
government deficit target was trimmed by E3.7 billion to E81.1 billion
(only E500 million less taking account of loans to Greece).

The measures are expected to boost revenues by another E6 billion
next year, which would still leave a E27 billion hole to plug in order
to hit the 3.0% deficit target, according to the national Audit Court.

The government’s multi-year projections see total public outlays
rising slightly less that the expected 1.2% growth in GDP next year,
while the tax burden would creep up steadily each year through 2016.

As the total number of public employees will be stabilized over the
mandate, further payroll reductions will be needed in most spheres to
offset the increase of 65,000 posts in the police and justice systems
and especially in public education.

–Paris newsroom +331 4271 5540; Email: paris@marketnews.com.

[TOPICS: MFFBU$,M$F$$$,M$X$$$,MGX$$$,MFX$$$]

Crappy data, but not as crappy as the Reuter’s median forecast of -8.5%.

Thank goodness for small mercies

From originally reported 303.8 bln SFR

Ongoing intervention to maintain the EUR/CHF 1.2000 floor  leaves no surprises to the increase in Swiss franc reserves

–Mid-Year Tax Hikes Aimed At Hitting Public Deficit Target

PARIS (MNI) – France’s central government deficit at end-May
amounted to E69.6 billion, E1.2 billion more than the previous-year’s
level, the Budget Ministry said Friday.

Outlays for the first five months of the year totaled E159.5
billion, E6.8 billion more than a year ago. This was mainly due to a new
financial management system that allowed ministries to hit the ground
running at the start of the year, the ministry explained.

Revenues through May were E2.4 billion higher on the year at E111.2
billion, due in part to the one-off sale of new airways frequencies at
the start of the year.

The ministry noted that the mid-term budget of the previous
government in March had over-estimated tax revenues and that as a
result, the new government of President Francois Hollande had revised
estimated business tax receipts down by E3.4 billion and VAT taxes by
E1.4 billion in the supplementary budget it unveiled on Wednesday. Tax
collections at the end of May were in line with these new estimates, the
ministry said.

This shortfall in tax receipts and the absolute necessity of
lowering this year’s public deficit to 4.5% of GDP were the principle
arguments of the new Socialist government for nearly E7.2 billion in tax
hikes in the budget revision announced this week. The full-year
government deficit target was trimmed by E3.7 billion to E81.1 billion
(only E500 million less taking account of loans to Greece).

The measures are expected to boost revenues by another E6 billion
next year, which would still leave a E27 billion hole to plug in order
to hit the 3.0% deficit target, according to the national Audit Court.

The government’s multi-year projections see total public outlays
rising slightly less that the expected 1.2% growth in GDP next year,
while the tax burden would creep up steadily each year through 2016.

As the total number of public employees will be stabilized over the
mandate, further payroll reductions will be needed in most spheres to
offset the increase of 65,000 posts in the police and justice systems
and especially in public education.

–Paris newsroom +331 4271 5540; Email: paris@marketnews.com.

[TOPICS: MFFBU$,M$F$$$,M$X$$$,MGX$$$,MFX$$$]

Italian 10 year govt bond yield up 6 bps at 6.04%.

These rising periphery bond yields are a big driver in recent euro weakness.

We sit at 1.2378.  Stops seen through 1.2350.

FRANCE DATA: May sa trade deficit narrowed to E5.325 bln from
E5.768 bln in April (revised from -E5.801 bln).
–Deficit slightly below expected; MNI survey median forecast -E5.5 bln
–May sa exports +1.2% m/m; sa imports +0.1% m/m

FRANCE DATA: May central govt deficit E69.4 bln vs May 2011 -E68.4 bln
- Jan-May outlays +4.5% y/y; Jan-May revenues +2.2% y/y

narrowing  from -Eur 5.768 in April

Deficit for Jan-May rises to -Eur 69.6 bln from -Eur 8.4 a year earlier

EUR/USD:  Bids 1.2350/60 (possibly sovereign), sell stops just below. Offers 1.2400/10 and 1.2430/50

GBP/USD:  Bids 1.5500/10 (possible barrier 1.5500) , tech support below 1.5485/90 stronger down at 1.5450/60. Offers 1.5545/55 and 1.5600/10

EUR/GBP:   Bids 0.7950/60 and 0.7900/10 ahead of barriers (0.7950/0.7900). Offers 0.7980/85 and 0.8015/20. Tech res 0.8040/60 (0.8041/58- 21/55 day MA's)

USD/JPY:   Offers 80.00/10 suspected buy stops on a break, offers 80.50/60 and larger buy stops up through 80.65.  Bids 79.50/60 (importers,Japan life Ins co's), sell stops just below ahead of bids 79.00/20, further stops just below.

EUR/JPY:   Offers 99.30/50, 99.90/00. Bids 98.80/90, small sell stops below, more bids 98.50/60, likely sell stops below ahead of tech supp 98.35/40

AUD/JPY:  Bids 81.60/70, tech supp 81.15/25, 200 day MA at 80.99, offers 82.30/40 ahead of tech res 100 day MA 82.66, buy stops through 83.00

EUR/CHF: Bids 1.2000/10(SNB), Offers 1.2025/50 buy stops through 1.2055

AUD/USD: (100/200 day MA's 1.0256/57). Bids 1.0240/50 (real money, sovereigns), sell stops though 1.0230 ahead of bids 1.0200/10, larger sell stops through 1.0180. Offers 1.0300/10 (poss commercial RBA)and 1.0320/30

EUR/AUD:   Bids 1.2020/30 (Jul 5 all time low 1.2022), offers 1.2100/10 and tech res 1.2160/70

AUD/NZD: Bids 1.2740/50 and 1.2700/10, offers 1.2810/25

NZD/USD:  Bids 0.8000/10, sell stops down through 0.8000 ahead of more bids 0.7960/70. Offers 0.8040/50 and 0.8065/75

 USD/CAD: Tech support 1.0115/20 (1.0117-200 day MA) and 1.0050/60, tech res 1.1065/75 and 1.0205/25 ( 1..0208/26 -14/21 day MA's)