QE Off, EU On - According to a report obtained by Reuters last night, IMF chief Dominique Strauss-Kahn will present a report that will stress the need for a larger rescue fund at a meeting of euro zone finance ministers and European Central Bank President Jean-Claude Trichet on Monday. "The recovery could still stay the course, but this scenario could now easily be derailed by the renewed financial market turmoil," the IMF report said. "The sovereign and financial market storm affecting the periphery (of the euro zone) constitutes a severe downside risk." I have two comments on this; if you increase the size it will send a signal to the market that Spain is going to need a bailout and my second point is good luck selling this to Germany. This encouraged renewed selling of the Euro after a rebound late last week took it back above $1.34. Last Friday, trading was all about the poor U.S. jobs numbers and talk of the possibility of QE 3 and 4. In essence, today we have a QE off and EU on trade which means that the market is concerned about Europe's problems and has shrugged off comments from U.S. Federal Reserve Chairman Ben Bernanke that quantitative easing could be bigger than estimated. In Asia, the Yen remains confined to a tight range against the USD but is trading firmly on the crosses as the Japanese government continues to struggle getting a budget passed. But this did stop bond from rising the most in two weeks on speculation the central bank will ease monetary policy further to counter the strengthening Yen. In Canada, the CAD back off from Friday's close but remained in a tight trading range ahead of tomorrow's Bank of Canada policy meeting. The central bank is expected to hold its target lending rate at 1%, which it last set in October after three successive increases of a quarter-percentage point beginning June 1, citing a weaker economic outlook for the U.S., Canada’s biggest trading partner.
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