• US must tell IMF to stay in Greece, not pull out
• Germany has ‘certain flexibility’ on Greek targets
• Draghi’s ECB plan ‘isn’t problematic’
• Merkel government, Weidmann have ‘different roles’ 
• No rift in Germany over Weidmann’s stance to Draghi.
• ECB bond buying  should warn speculators off the euro

Bloomberg reporting

Looking to sell  up to Eur 4 bln in 10 year  1.75% July 2022 bunds.

Results are expected around 0945GMT

GBP/USD’s off around 45 pips from the early european highs  and looking a bit wobbly ahead of the quarterly inflation report from the ‘Old lady’ at 1030BST.

There’s talk that UK’s growth forecast will be slashed again to near zero  from 0.8% predicted in May, which may well open the gate for another bout of stimulus measures.

Cable’s presently trading around 1.5582 after falling to a day’s low of 1.5574

He starting to build an unrivalled collection of gaffes..

Here’s his latest ………

By Stephen Sandelius

PARIS (MNI) – In the run-up to the German constitutional court’s
ruling in September on participation in the future Eurozone bailout
fund, France’s constitutional court will pass judgement in the next few
days on what the government must do to adopt the treaties establishing
the fund.

The issue for the French court is simpler than for the German
judges in Karlsruhe, since it need only decide whether the fiscal
constraints in the treaty must be enshrined in the national constitution
or whether, as President Francois Hollande argues, an overriding budget
law would suffice.

However the court rules, France has no choice but to adopt the
treaties, analysts say. Amending the constitution might prove more
laborious and time-consuming, but perhaps more convincing in the end.

“If you have a constitutional change, it would be much more
difficult for France to wriggle out” of commitments to bring public
finances into balance, said Citi analyst Guillaume Menuet. This would
leave “one less question mark” about the ability to stick to deficit
targets.

Since France is often seen in the markets as a borderline budget
case, lagging other partners in fiscal consolidation, “the signal would
be stronger if there were a constitutional change,” agreed Laurence
Boone, economist at Bank of America Merrill Lynch.

Former President Nicolas Sarkozy, who hammered out the initial
accord on the EU Fiscal Pact with German Chancellor Angela Merkel, had
hoped to win over enough support from the Socialist opposition to obtain
the three-fifths majority of both houses of parliament required to
insert the balanced-budget goal in the constitution.

Having railed over the government’s spending cuts, the Socialists
were hardly inclined to sign on to an “austerity” treaty with the
presidential election only months away. As Socialist candidate, Hollande
said he would refuse to promulgate the treaty without parallel measures
to bolster growth.

Yet even after obtaining a modest package of stimulus measures,
Hollande the president refused to follow Sarkozy’s plan for a
constitutional amendment, arguing that an overriding “organic” fiscal
law would do the trick. “I do not consider that a commitment that is
obligatory for a few years should be written in stone in our texts,” he
asserted in an interview on the July 14 national holiday.

While the Fiscal Pact does not strictly require a balanced budget
rule in national constitutions, it foresees “binding, permanent and
preferably constitutional provisions” to this effect, which is hardly
the spirit of Hollande’s comments.

Still, to avoid legal complications, Hollande had already asked the
constitutional court the day before to determine whether a “golden rule”
budget law would require a modification of the constitution.

For Socialist lawmaker Jean-Jacques Urvoas, president of the
National Assembly’s Commission on Laws, the restrictions on national
budget sovereignty would probably necessitate a constitutional
amendment, since the Fiscal Pact, having been signed by only 25 of the
27 EU member states, would not be covered by existing constitutional
clause on EU legislation.

In theory, an organic law would be easier for the government to
pass, since it commands an absolute majority in the Assembly and there
is a majority of leftist parties in the Senate. Prime Minister Jean-Marc
Ayrault’s plan was to submit the organic law, together with the Fiscal
Pact, the stimulus package and the European Stability Mechanism to
parliament for approval in late September or early October.

Yet in practice, some left-wing Socialist lawmakers may be loathe
to ratify the prescription for austerity that they had denounced a year
earlier. Hollande has bitter memories of the party rift over the
referendum on the European Constitution in 2005. Within the Socialists
junior coalition partner, the Greens, there is also criticism of the
focus on budget austerity.

On the far left, the Leftist Front party has demanded a public
referendum on the issue. An OpinionWay survey conducted last month
suggested that a majority of the French are in favor of a referendum and
- surprisingly enough – that a majority would also back treaties.

Hollande might not be too disappointed if the court calls for a
constitutional amendment, since he could no doubt muster enough votes
from the moderate-right UMP party for a three-fifths majority, even if
there were dissenters in his own camp. This option would only add to the
institutional support for budget discipline.

While the Socialists may “try to keep a semblance unity on the
topic,” suggested Citi’s Menuet, Hollande may “secretly hope” to go the
route of the constitutional amendment.

Since UMP leaders continue to argue in favor of a constitutional
amendment as the best guarantee for a return to balanced public
finances, it is hard to imagine there would not be support within the
party. The UMP could spin this as a vindication of its original strategy
and try to win back-door concessions from Hollande on other matters as a
price for its backing.

Analyst Boone suggested that a divisive national debate on the
issue next fall might trouble the markets somewhat, but that a political
majority for a constitutional change exists: “I don’t think it’s in
anybody’s interest to be the one that prevented that and trigger a
crisis in the Eurozone – especially now.”

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

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

He only gets paid a paltry $200 mio at year (according to the NY times…)

In line with Reuters/market expectations,  and the 10th consecutive monthly fall

Spain’s IBEX , STOXX, CAC 40 all down around 0.3% and UK FTSE off around 0.5% on back of BT fall.

EUR/USD’s testing bids ahead of 1.2350 area. Sell stops are reportedly placed on a break down of 1.2340. Low today has been 1.2362  and were presently trading around 1.2372.

Eastern european names apparently are the bidders in the 1.2360′s and the move lower was reportedly on the back of EUR/JPY sales

Central government deficit target for 2012 raised to 4.5% from 3.5%… Bloomberg

PARIS (MNI) – French economic activity is likely remain on a
downward slope in the months ahead, the Bank of France forecast
Wednesday, citing the results of its monthly business survey.

The central bank projected another modest GDP contraction of 0.1%
in 3Q after confirming last month its estimate of a comparable downturn
in 2Q. Back in June, the national statistics Institute Insee had hoped
that the second half would bring a very gradual recovery. But this is
not the message from recent leading indicators.

The central bank’s latest survey indicated that industry output
contracted slightly in July, “due mainly to lower levels of activity in
the automotive and textile sectors.” Sector capacity utilization
slipped back 0.3 point to 76.9%, retracing most of the upturn in June.
Finished goods inventories were slightly above target and order books
contracted further. Prices were little changed.

The central bank’s sector climate indicator, based on the latest
three months’ results, slipped another point to 90, the lowest level in
nearly three years.

Manufacturers’ overall production outlook for August remained in
negative territory at -3, unchanged from July, pointing to “a slight
slowdown in economic activity” in the coming months, the central bank
said.

Other leading indicators for industry also point to weak activity
ahead. Insee’s index of own-company expectations is far below normal and
the factory PMI sunk to a 38-month low of 43.4 in July.

France’s services sector stabilized in July, as providers had
expected. Prices were stable as well and payrolls rose slightly. But the
soft patch of past months pulled the services climate index down one
point to a 31-month low from an upwardly revised 91 in June.

The outlook for services activity in August edged up one point to
+1, which the central bank interpreted as a signal for stability in the
short term.

France’s services has PMI bounced nearly five points since May to
reach the stability level of 50.0 in July, but new business declined for
the fourth month in a row. Insee’s sector surveys show company
expectations at quite low levels despite some recovery in July.

–Paris newsroom +331 4271 5540; e-mail: ssandelius@marketnews.com

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

FRANCE DATA: June sa trade deficit widened to E5.990 bln from
E5.471 bln in May (revised from -E5.325 bln).
- Deficit higher than expected; MNI survey median forecast -E5.0 bln
- June sa exports -1.9% m/m; sa imports -0.4% m/m

Imports slip to Eur 42.534 bln  from Eur 42.709 bln (rev), and exports fall to Eur 36.544 bln from Eur 37.238 bln(rev) in May

Bq de France  July Business indicator falls to 90 from 91 in June in line with expectations. BDF also forecasts a contraction of 0.1% in economy for Q3

EUR/USD:  Bids 1.2370/80 larger down at 1.2330/50, sell stops below. Offers 1.2400 layered up to 1.2450 buy stops above on a break of the 1.2450 barrier.  Also talk of another barrier at 1.2500 (supposedly part of a 1.20-1.25 DNT)

GBP/USD:   Offers 1.5630/50 and 1.5690/00.  Bids 1.5600/10 some sell stops down through 1.5580 ahead of more bids 1.5540/50 and 1.5500/10, sell stops below through 1.5495.

EUR/GBP: Strong offers 0.7960/70 and tech res 0.7967 (55 day MA) stronger again up at 0.7990/00. Bids 0.7900/10, sell stops just below.

USD/JPY:  Bids 78.35/50 and 78.00/10 (semi official, Kampo, importers, Japanese lifers), large sell stops through 77.90 and 77.50. (barriers noted at 77.75 and 77.50). Offers 78.80/00 (exporters) some buy stops mixed in through 78.85, and more stops through 79.00 just ahead of tech res at 55/200 day MA's at 79.09 /17

EUR/JPY: Bids 96.90/00, 96.50/60, and tech supp 96.35/40 (96.36 Tenkan line). Offers 97.40/50 and stronger up at 97.75/8580

AUD/JPY:  Bids 82.50/60 (Japanese names) sell stops below. Offers 82.90/00 and 83.15/25

EUR/CHF: Bids 1.2000/10(SNB), Offers 1.2025/30

USD/CHF: Tech supp 0.9660/70 and 0.9630/35. Offers 0.9700/10 and 0.9730/40

AUD/USD:   Offers 1.0580/00 (model funds, importers), larger 1.0630/50. Bids 1.0530/40 and 1.0500/10 sell stops through 1.0500.

EUR/AUD:  Offers 1.1760/70 and tech res 1.1845/55, likely buy stops above. Bids 1.1735/45 and  tech supp 1.1695/05

NZD/USD:  Offers from 0.8155/65. Bids 0.8120/30 and 0.8070/75

 USD/CAD:  Bids 0.9950/60 (funds, Canadians). Offers 1.0000/10 and 1.0020/30

GERMANY DATA: June sa trade surpl+E16.2bn;May rev +E15.3bn(+E15.0bn)
– Germany June nsa trade surplus +E17.9bn; May rev +15.6(+E15.3bn)
– Germany June nsa c/a surplus +E16.5bn; May rev +E8.1bn(+E9.0bn)
– See Mainwire for more details

Above Reuters forecast of Eur 15 bln

June sa exports -1.5% m/m, imports -3.0%m/m,

Unadjusted exports  +7.4% y/y, imports +1.5% y/y

– Japan July Watchers’ Current Index 44.2 Vs June 43.8
– Japan July Watchers’ Current Index Posts 1st Rise in 4 Mths
– Japan July Watchers’ Forward-Looking Index 44.9 Vs June 45.7
– Japan July Forward-Looking Index Posts 3rd Straight Fall
– Japan Govt Keeps View: Economy Shows Some Weakness

TOKYO (MNI) – The Economy Watchers’ Survey index for Japan’s
current economic climate posted the first rise in four months as the
heat waves boosted sales of beverages and air conditioners but the
outlook remained bleak amid slowing subsidy-driven car sales, Cabinet
Office data released Wednesday indicated.

The forward-looking index fell for the third straight month also
due to worries about summertime electricity supply shortages and the
impact of the proposed sales tax increase on consumer sentiment.

The current conditions index rose to 44.2 last month from 43.8 in
June, which was the lowest since May 2011, when it stood at 36.1 in the
aftermath of the devastating earthquake.

The pace of year-on-year growth in new vehicle sales slowed to
36.1% in July from 40.9% in June, 66.3% in May and 92.0% in April.

In December the government revived subsidies for buying
low-emission vehicles. The program had been terminated in September
2010, which caused a year-long stagnation of domestic vehicle sales.

However, because the program is running out of money due to strong
demand, it may be terminated again in August, one month earlier than
expected.

The forward-looking index, which gauges conditions two to three
months ahead, slipped to 44.9 in July from 45.7 in June, a third
straight fall.

Based on the survey results, the government maintained its economic
assessment, saying that the economy “has been picking up moderately but
is now showing some weakness.”

The watchers’ index gauges whether respondents with jobs most
sensitive to economic conditions — taxi and truck drivers, department
store sales staff as well as restaurant and shop owners — believe
economic conditions have improved or worsened from three months before.

The household sub-index for the current conditions increased to
42.8 in July from 42.1 in June.

The business sub-index for current conditions climbed to 44.8 in
July from 44.4 in June.

The labor sub-index decreased to 52.1 in July from 53.9 in June as
the growth in job offers in the manufacturing sector was flat after
recent gains.

The Cabinet Office said the survey was conducted between July 25
and July 31.

tokyo@marketnews.com
** MNI Tokyo Newsroom: 81-3-5403-4835 **

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

Gerry’s a guru, he must have seen this week panning out this way.. EUR/USD same as it ever was just under or around 1.2400 and showing little signs of direction for now.

EUR/USD offers start from 1.2400 and are layered up to 1.2450 where a barrier is still intact.Buy stops lie just above ahead of further offers infront of a 1.2500 barrier which also forms part of a 1.20-1.25 DNT. Downside sees bids  at 1.2370/80 with stronger bids down at 1.2340/50 and sell stops on the break of 1.2340

On the data front there’s German and French trade balances along with Spanish and Germany industrial production, but can’t see that haven’t any significant effect whilst the market remains on snooze control. The BOE releases it’s inflation report at 0930GMT

For the 1000NY/1400GMT cut

 EUR/USD: 1.2250, 1.2300, 1.2320, 1.2400, 1.2410, 1.2475, 1.2495

USD/JPY: 78.50, 78.80, 79.00, 79.85

USD/CHF: 0.9705

AUD/USD: 1.0450, 1.0500, 1.0515

GBP/USD: 1.5600, 1.5810

EUR/GBP: 0.7800