This is a review of the elements likely to affect foreign exchange (forex) trading in the European session:

Main headlines

G-7 Discusses Potential Fiscal Measures If Growth Falters - Bloomberg

Schäuble and Lagarde clash over austerity - FT

US Fiscal Cliff Is 'Major Concern' for World: IMF's Zhu - CNBC

Europe's Inflation Rates Diverge - WSJ

Currency hedge funds head for EM returns - FT

Iran finmin: country's FX reserves are in good position - Reuters

Americas wrap-up

Jobless Claims in US Fall to Four-Year Low - Bloomberg

Fed Presidents Dismiss Allegation of Job Data Tampering - Bloomberg

Fed's Yellen says Europe, housing strains stifling US recovery - Reuters

Fiscal Cliff 'Plunge' Not Yet Priced In: Blackrock - CNBC

Romney extends lead over Obama: Reuters/Ipsos poll - Reuters

Brazil Swap Rates Fall on Copom Signal; Currency Little Changed - Bloomberg

Vale, Brazil's golden goose, faces challenges - Reuters

Asia-Pacific summary

Asian Stocks Rise on Japan-China Dispute Talks, US Data - Bloomberg

Yen falls on intervention fear - FT

Japan and China Agree to Hold Talks on Rift After Noda Call - Bloomberg

China's Banks Said to Resist Cutting Lending Rates - Bloomberg

Amnesty warns over land grabs in China - FT

Japan Cuts Economic Assessment as Maehara Talks of 'Crisis' - Bloomberg

South Korea cuts rates to boost faltering growth - FT

Eichengreen: Growth Still Matters for Korea - WSJ

Pesek: Celebrity Economist Rushes to Save India - Bloomberg

Singapore Forgoes Currency Stimulus on Inflation Risk - Bloomberg

European news

OECD's Gurria: Spain's Reluctance for Bailout Justified - CNBC

Weidmann Sees German Economy Stagnating in Second Half of 2012 - Bloomberg

Merkel hints at tax cuts for growth boost - FT

Europe Wins Praise From Geithner, Cohn as IMF, Germany Spar - Bloomberg

Greece's Largest Firm Flees Crisis-Torn Home for UK - Bloomberg

Poland's Push to Weaken Zloty That Never Was - WSJ

UK Home Values Drop as Olympic Knock-On Extends Summer Lull - Bloomberg

EADS CEO Faces Terminator Torment After Merger - Bloomberg

FOREX action

EUR: The euro cross-rates move sideways yesterday's rally. The lowest reading since February 2008 of initial jobless claims in the US prompted beta seeking strategies worldwide. Spain's sovereign rating cut by S&P had a short-lived effect. EUR-USD firms above 1.2950 and seems to be heading towards the next resistance zone found at 1.30. On the daily chart we see the formation of a batman technical pattern. EUR-JPY trades close to 101.70.

GBP: The sterling crosses show more subdued price action compared to the euro trades. Cable is under 1.6050 while GBP-JPY is close to 125.85. EUR-GBP is rallying towards the 0.8100 resistance zone.

CHF: The Swiss franc hedges up against the US dollar. USD-CHF is consolidating close to 0.9325 after breaching 0.9400 in the last few days. EUR-CHF is still trading below but close to 1.2100.

Nordics: The Swedish krona and the Norwegian kroner are buoyed by the strength of the euro. Both the SEK and the NOK advance versus the greenback. EUR-SEK trades close to 8.67 and EUR-NOK is below 7.39.

USD & JPY: The US dollar and the Japanese yen are less in demand after the above mentioned IJC figures in the USA. Today's macro figures, PPI and Michigan, are not likely to affect USD trading.

CAD, AUD & NZD: The three dollars are favoured by a risk-off context. The kiwi leads the pack followed by the aussie and the loonie. They advance mostly against the yen that falls amid intervention rumours.

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