Euro Pressured As Italian Bond Auction Disappoints

Italian bonds at center of attention; UK CPI at 3-month high, BoE’s Posen renews call for QE2. EUR/CHF near the 1.20 level. WSJ story of BNP Paribas no longer having access to funds is unsubstantiated. US Federal Budget are due later today.

Bank of England Monetary Policy Committee member Adam Posen renewed his calls for QE2 today when he said the central bank should “attack the longer-end of the gilt yield curve with an additional round of GBP 50bln of asset purchases to be made over the next 3 mths”. Posen said the said that with the global economic outlook worsening, the bank should "arguably" make even more asset purchases.

UK Aug inflation highest since May at +4.5% y/y from July’s 4.4% y/y; in line with expectations. Gains attributed to record gains in prices of clothing and footwear. UK Jul trade deficit rose to GBP8.92 bn from GBP 8.873bn in Jun

Last night saw the single currency pull back sharply from seven month lows against the US dollar and 10 year lows against the yen, after reports that Italy was in talks with China about possible investment opportunities. Later this morning Italy are also holding a 5 year debt auction of €3-4bn which given that bond yields have continued to rise since the resignation of ECB member Stark over the bond buying program will be a key indicator of investor attitude towards the worlds third largest bond issuer.

Australian business confidence for August nosedived from +2 in July to -8 in August suggesting that despite recent fairly robust economic data in recent days, business leaders don’t feel that confident about the global economy against a backdrop on economic conditions in Europe and the US.

The US dollar index slipped back from six month highs yesterday, however if recent comments by Dallas Fed President and FOMC dissenter Richard Fisher are anything to go by it could well be a brief pause, saying he believe that the bar for further easing remained very high and he would be unlikely to support it at the September meeting.

The New York session starts at 8:30 am ET with the Import Price index for August that is expected to show a decline to 12.5% from 14% on annual basis. At 10:00 am ET September IBD/TIPP Economic Optimism index is due and is seen higher at 37.5 from previous 35.8 and finally Federal Budget deficit at 2:00 pm ET should narrow to USD -126.5 bln in August from USD -129.4 bln in July

********ASHRAF's WEBINAR TOMORROW************

Join Ashraf for an All-Star FX Webinar; For the First and Possibly Only Time ever, the most Respected Experts in the Retail Forex Industry are coming together to give you 5 Days Worth of Expert Education and Advice. Not only is the $25 admission price a BARGAIN , but part of the proceeds will also go to Doctors Without Borders and an Orphanage in Africa . Ashraf's session is on September 14 7 AM - 8 AM ET / 11 GMT - 12 GMT . FOR MORE DETAILS, click here: http://bkforexadvisors.infusionsoft.com/go/FX1234/Alaidi

&