• If rates concerns confirmed we’ll take action to prompt change in banking sector
• Investigation involves possible manipulation of libor, euribor and tibor on several occurances

Oh dear, why can’t people just be honest

• Only viable banks will receive an EU bailout
• Undecided over when banks will recive aid
• Bank recapitalization process should be quick and will be speeded up if needed
• Not all companies will pass on VAT increase
• Region debt help won’t damage Spain’s credit rating

Bloomberg reporting

LONDON (MNI) — Construction output fell 6.3% on the year in May on
a non-seasonally adjusted basis.

Comparing the three months from March to May 2012 with the same
period one year ago, the volume of construction output decreased by 7.4
per cent, new work decreased by 9.9% and repair and maintenance
decreased by 2.4%.

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

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

Roll on the weekend. Think I’ll start mine now…….

Speaking on Deutschlandfunk radio  Philipp Roesler said Greece couldn’t expect a ‘rebate’ on its reforms, and that the IMF, ECB and European commission were running out of patience with the country’s progress in implementing economic reforms.

He also added that it was unlikely that Italy would seek a bailout after starting ‘enormous’ reforms

Up from 324.6 bln in May.

For the 1000NY/1400GMT cut

EUR/USD: 1.2135, 1.2170, 1.2175, 1.2200(large), 1.2235, 1.2300, 1.2350, 1.2375,

USD/JPY: 79.00, 79.25, 79.75, 80.00

AUD/USD: 1.0000, 1.0100, 1.0195, 1.0200, 1.0220

AUD/JPY: 83.00

GBP/USD: 1.5500, 1.5650

EUR/GBP: 0.7900

USD/CAD: 1.0150

Spanish 5 year credit default swaps up 12 bps at 577 bps.

Italy final June inflation figures due at 08:00 GMT to be delayed until 09:00 GMT due to strike action by statistics agency staff.

Another barnstormer. I’m slowly losing the will to live.

Anyways, some focus on todays Italian bond auctions after the Moody’s Italy downgrade.

Target amount 3.5-5.25 bln euros spread through 2015, 2019, 2022, 2023.

Results expected circa 09:10 GMT.

EUR/USD relatively steady at 1.2193.   In fact scratch that, EUR/USD comatose at 1.2193.

– Adds Comments to Story First Transmitted Thursday At 11:18 EDT

FRANKFURT (MNI) – The European Central Bank’s main interest rate is
“appropriate” for the moment, but there is nothing preventing the
central bank from cutting it below 0.75% if needed, according to ECB
Governing Council member Klaas Knot.

“Currently, we believe 0.75% is appropriate,” Knot said in an
interview released Thursday by Financial Times Deutschland. “Should the
situation worsen, there is no article of faith that would prevent us
from going below 0.75%.”

Knot, who also heads the Dutch central bank, said the decision to
cut rates further would be based on the outlook for inflation, which had
been the key determinant for cutting rates at the last meeting.

“The only reason we went to 0.75% is because of medium-term
expectations for price stability. Inflation expectations fell before our
rate cut. The same was true for producer prices,” he said.

“Before, everyone believed 1% was the rate floor. Our decision
showed that was not the case,” Knot added. “Now, I can only say that
0.75% is no article of faith for us” either.

“The only article of faith we have is that the interest rate level
must bring us as close as possible to price stability over the medium
term, which means an inflation rate of below, but close to 2%” for the
Eurozone, he said.

Knot noted the ECB’s two longer-term refinancing operations helped
to prevent a credit crunch and that, if needed, a third LTRO was
possible. “But right now, I hardly see an additional benefit in this,”
he said.

The Dutch central banker stressed that he saw no inflation risks
stemming from the liquidity injections, adding that inflationary
pressures could only arise through monetary and credit growth: “So far,
there is no sign of this.”

Knot applauded the agreements made during the two-day EU summit
late last month, saying that governments had shown their commitment to
do whatever was necessary to overcome the crisis.

However, he was skeptical about the effectiveness of government
bond purchases by the European Stability Mechanism on the open market,
noting that when the ECB made similar purchases, the fall in yields was
only temporary.

“Still, there are circumstances in which [the purchases] are
useful,” Knot conceded. “However, I would suggest that one should
already know how to exit from the start. Moreover, the purchases would
be subject to strict conditions.”

Knot underscored his opposition to giving the ESM a banking
license, saying that having the bailout fund financed by the ECB would
amount to a violation of the prohibition against state financing.

“The ESM is part of the state sector and cannot be financed by the
ECB,” the central banker said.

On banking supervision, Knot said that a plausible model could be
that of the Eurozone; one central entity and 17 national institutions.
“I think we need the supervision of a single legal entity,” Knot said.
“A European System of Banking Supervisors, where there is a central and
national supervisors.”

“The responsibility for banking supervision would need to be passed
on to this system,” Knot said, adding that the centre would intervene
when needed.

Knot said the ECB would have to examine other countries’
experiences before considering whether it can bring the discount rate
below 0%.

“We have no experience with negative interest rates,” Knot said,
adding the ECB is “watching closely” the experience of Denmark, where
the discount rate is currently at -0.2%.

“We should learn from the experiences of other countries with
negative rates before we decide if this is an option for us,” Knot said.

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

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

BERLIN (MNI) – German Chancellor Angela Merkel is willing to allow
Greece extra time to meet its deficit goals of at most a couple of
weeks, German daily Rheinische Post reported Friday citing government
sources.

The Greek government, however, announced on Thursday that it is
seeking a postponement of the deficit goals of at least two years.

According to Rheinische Post, the preliminary report on Greece by
the so-called troika of the EU Commission, ECB and IMF shows that the
country has missed so far 210 out of 300 concrete demands for fiscal
consolidation.

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

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

EUR/USD: 1.2150

USD/CHF : 0.9900, 0.9950,1.000

EUR/GBP: 0.7850, 0.7825

EUR/USD has drifted off to 1.2185 at writing.

Buy orders 1.2150/70 ahead of 1.2150 barrier option interest, sell stops below there.

PARIS (MNI) – French retail sales bounced back 4.3% in real,
seasonally-adjusted terms in June, but were still 0.3% lower on the
year, the Bank of France estimated Friday on the basis of its monthly
business survey.

Food sales alone were up 4.5% in June, while turnover in
manufactured goods rose 4.7%.

Weak sales in previous months left 2Q results down 1.0% on the
quarter. Declines were led by clothing, sporting goods and jewelry. Only
new cars and audio-visual equipment posted significant gains.

The 2Q results are worrisome, given the traditional role of private
consumption as the main driver of the French economy. Fundamentals are
not promising for consumer spending, since underlying wage trends are
barely keeping up with inflation and looming tax hikes will take a
bigger bite out of family budgets.

Private consumption grew by 0.2% in 1Q, but the gain was due mainly
to elevated heating costs, which obliged households to cut back outlays
on manufactured goods. Average spending on goods for April and May was
down 0.2% from 1Q.

Insee expects consumption to contract slightly in 2Q and recover
only marginally in the second half, as households draw down savings
further. The average full-year gain would be 0.2%, as in 2011.

–Paris bureau, +331 4271 5540; Email: ssandelius@marketnews.com

[TOPICS: M$F$$$,M$$EC$,M$X$$$]

Pete feels compelled to help the struggling Spanish economy and has decided to spend his holiday euros in Majorca.

After Moody’s downgrade. Whoa, whoa and thrice whoa……

Spanish 10 year govt bond yield up 9 bps as well at 6.72%.

The current US treasury Secretary raised concerns  and outlined reforms  to the LIBOR system, suggesting that the British authorities “strengthen governance” and “eliminate incentive to misreport”, but the warning came too late

More .. NY times   .

EUR/USD sits at 1.2195.

What’ll we see first 1.2100 or 1.2300?

Reasoning/s appreciated, but not obligatory…..

EUR/USD:   Bids/ tech support 1.2150/70 (July 2010 lows, 1.2150 possible barrier) sell stops just below. Offers 1.2240/50 and 1.2290/00 buy stops up through 1.2300

GBP/USD:  Offers 1.5470/80 likely buy stops through 1.5485, tech res 1.5510/20. Bids 1.5415/25 and tech supp 1.5390/00

EUR/GBP:   Bids 0.7870/75 ahead of tech supp 0.7840/45. Offers 0.7915/20, 0.7945/50 and 0.7980/85

USD/JPY:   Offers 79.50/60 and 79.90/00.  Sell stops through 79.20 Bids 79.00/10 (, postal, Japan Life Co's and200 day MA 79.03), sell stops through 78.95.

EUR/JPY:   Offers 96.90/00 and 97.50/60.  Bids 96.50/60 likely sell stops below

AUD/JPY:  Offers 80.65/70, tech res now around 81.10/15 (200 day MA at 81.16). Bids 80.00/10 sell stops below ahead of tech supp 79.35/45

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

AUD/USD: Bids 1.0120/30, sell stops just below ahead of more bids 1.0100/10,   and sell stops through 1.0100. Offers 1.0180/00, Tech res 1.0270/75 (200 day MA 1.0274)

EUR/AUD:  Bids 1.1985/90 and 1.1930/35. Offers 1.2050/60 and 1.2090/00, possible buy stops above

NZD/USD: Bids 0.7860/70 and 0.7840/50, likely stops through 0.7825. Tech res 0.7955/60 (0.7957-200 day MA) ahead of 0.7985/90 (100 day MA – 0.7987)

USD/CAD:   Tech supp 1.0170/75 (55 day MA 1.0173), suggested sell stops through 1.0165 ahead of tech supp 1.0110/15 (200 day MA 1.0111). Offers 1.0200/10 and 1.0250/60

Everytime I see that name I think of James Bond!!

• Italian borrowing costs unreasonably high
• Italy PM Monti right in asking for bond purchases to stabilise market spreads (are ya listening Angela?)