Again Asia outstripped Europe in terms of market excitement.  Overnight rumours of a coup in Pakistan were swiftly dismissed but they caused a flurry of yen buying across the board.  By the time of the BoJ's policy decision, the yen's Asian gains had been reversed, but yen selling continued following the policy announcement from the BoJ.  As expected, Japanese interest rates were left unchanged at 0.1% y/y.  However, the BoJ's Shirakawa went further than usual by stressing that the BoJ will not tolerate an inflation rate equal to or below zero.  This statement hints that the BoJ may announce further monetary policy measures aimed at stepping up liquidity in the system which would weigh on the JPY.  Earlier this month the BoJ announced a JPY10 trn emergency credit facility which can be associated with the push higher in USD/JPY.  This morning, USD/JPY has pushed up to the USD/JPY 90.20 area, EUR/JPY is creeping back towards 130.00. 

The Swiss franc was also a source of excitement overnight.  A break below the EUR/CHF1.5000 level caused a plunged as low as 1.4900 before a bounce ensued as fear of possible SNB intervention rose.   The break of 1.5000 followed a creep lower in EUR/CHF yesterday.  The fact that the Swiss economy pulled out of recession in Q3 has heightened speculation that the SNB are longer in need of emergency policy measures and may loosen its commitment to preventing an appreciation of the CHF vs the EUR going forward. 

Good news came this morning in the form of German's IFO index.  This rose by a slightly greater than expected amount in Dec to 94.7.  Following on from some recent disappointing news on the German production sector, these data help soothe the outlook for the recovery going forward.  EUR/USD has pulled away from this week's lowest levels but has found a barrier at the USD1.4410 level.  Greece's Finance Minister Papaconstantinou has continued his charm offensive reporting today that the sale of state assets next year could raise EUR 2.5 bln.  However, with a decision from Moody's on Greece's credit rating due, the market remains sceptical on Greece's budget position and this is likely to cloud the outlook for the EUUR going forward.  UK borrowing data were also better than expected this morning.  That said the PSNCR rose to GBP 14.7 bln in November which is a sharp reminder of the awful position of the UK's budget position.  Weaker than expected UK M4 data at flat m/m suggest that the effect of BoE policy on the real economy remains subdued.  EUR/GBP continues to trade sideways pivoting around the 0.8870 area.  Cable pushed higher in early European hours encouraged by the modestly better tone of EUR/USD. 

There are no US releases scheduled this afternoon.  Canadian Oct wholesale sales are due.