ForexLive European Wrap: Ugly start, but some stability starting to creep back ahead of the Camp David summit

Fitch warns of mass Eurozone downgrades to sovereign debt ratings IMF holds off visit to Greece until after June 17 elections UK PM Cameron tells Merkel she is the only one who can save the euro German April PPI +0.3% m/m, +2.4% y/y, worse than expected and lowest y/y print since June 2010 Italian March Industrial orders rise 3.5% after a 2.6% fall in February BOE's Posen:  I might have been too optimistic on the UK economy Germany's Schaeuble: No austerity plan for Greece  4.8 magnitude earthquakes shakes Eastern Japan Gold rises towards $1590 on safe haven demand EU Commission denies earlier talk of contigency plans being drawn up by ECB/EU in the event of a Greek euro exit. A very nervous start after Asian equity markets collapsed over 3% following ongoing Greek concerns and Moody's downgrades of Spanish banks which started a run on banking shares. EUR/USD slumped in early trade and on the European open took out a 1.2650 barrier to  lows of 1.2642 led by heavy sales from macros, Japanese and US names . Real money and Middle Eastern demand then emerged, with the former apparently related to a large asset reallocation trade,  and together with rumours of  a Spanish ban on short stock selling lifted the EUR/USD and european stocks off the lows. Asian sovereign selling related to diversification of overnight  USD/Asia sales countered some of the demand but EUR/USD did manage a peek just above 1.2700 before running into larger offers. Option attraction to a large (2 bio) 1,.2700 strike  today is currently keeping the  focus.  USD/JPY was largely a non-event through a 79.19-47 range, the lows seen as EUR/JPY took out stops through 100.50 to 100.22 on the early sell-off in EUR/USD, before bouncing to 100.79. Large stops now rest on a break of 100.00 and offers  sit above at 100.90/00. GBP/USD pulled up  from early lows of 1.5732 assisted by the EUR/USD and dovish remarks from Posen who admitted his inflation forecast was off and that the amount of QE required might rise. Cable rallied to 1.5821 before running into strong offers. AUD/USD got an early savaging following  a flushing of a 0.9850 barrier and tripped some heavy stops through 0.9820 and 0.9800, but sizeable bids just below soaked up the downdraft and led a steady climb back  up to 0.9867. European stocks were a bit mixed but strong recoveries were seen  in the Spanish index following talk of  a short selling ban on bank shares. IBEX/FTSE MIB are currently up fractionally,  with the main loser on the morning being the FTSE 100 down around 0.9% . The STOXX 50 is  flat on the day.