Some notes

Aug 10, 5:30am EST: The BoE Governor Mervin King: "we can carry out more asset purchases but this is not for today"

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Spike after dovish UK inflation report and BoE governor comment followed by EUR slide due to French and Italian bank shares drop. Also rumors France will be downgraded.

Senior government sources tell Class CNBC, CNBC’s Italian partner, that a short-selling ban will be imposed in France and Italy after Thursday's market close. EU gets a lift to 4294.

Overnight France, Belgium, Italy and Spain instigated banning short sales on financials. A policy that is never a sign that things bode well. France downgraded by a smaller rating agency.

9:53 (Dow Jones) Amid last week's acute fears about Italy and Spain, the ECB came to the rescue and bought debt of both countries, settling $22 billion -- the largest amount since its bond-buying started in May 2010. Referring to the ECB's buying as a "bazooka", Douglas Borthwick at Faros Trading said in a research note that he expects the euro to close "above $1.50 before it closes below $1.39." EUR/USD pops to session highs around $1.4440

2:00 am EST: German prelim GDP Q2 0.1% vs 0.5% exp. Q1 revised down to 1.3% from 1.5%.

Fitch confirms US AAA rating. Says may downgrade if no additional cuts are made.

In the run-up to the press briefing that followed on from the Merkel/Sarkozy meeting, equities were firming and the EUR was outperforming the USD. The press briefing has sparked a rally in EUR/USD to new highs as Sarkozy and Merkel announce plans to propose "common governance" of the eurozone with a president that is elected for 2 1/2 yr. Proposal would ask 17 eurozone members to put debt limit rule in constitution by 2012. The two leaders are seeking a harmonised company tax rate. The meeting has ended with the two leaders outlining a path forward for a more centralized eurozone, which the FX and equity markets seem to like.