Risk On, A Confluence of Factors - With so many factors pointing to a risk on trade, I don't know where to start. Late yesterday we had a deal to maintain the Bush tax cuts for the next 2 years. Reports out of the UK today showed that manufacturing and consumer spending were both up adding to evidence that the UK recovery was gaining traction. We had no change in monetary policy in both Australia and Canada. Also, sovereign debt fears are abating at the moment with news that 2 independent parliament members in Ireland were going to vote for the budget thereby cementing its passing into law. These confluence of factors outweighed rumours of an interest rate hike in China over this upcoming weekend, it looks like nothing can stop this year end risk on trade at this point. As evidence, European shares hit a 26-month high today. It's funny how U.S. Federal Reserve Chairman Ben Bernanke assurance that he would do more if the economy needed it is helping to pull the USD up against the Euro. What does this mean for the forex market? USD down across the board, which reinforces the idea that the USD's rally has been more a function of Euro weakness than a real change in underlying USD sentiment. Having said that, I don't expect the Irish vote to start a Euro rally because the problem are still there, they are just abating for the moment.
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