We climbed the wall of worry today only to step off the top rung almost level to where we started. So it goes – sideways is the new up. Bears continue to predominate every discussion – leaving a 0.25% rally in equities a win. Similarly, bonds at 2.91% in 10Y is a significant rally as 3.02% holds again. The drivers of the day were Geithner – calling this a “global crisis” and JPMorgan’s Dimon – seeing “signs of moderate improvement.” Overnight the news of the China trade balance shocked many as they recognized that while China may have the money and will to spend its way out of its global trade induced recession it probably can’t do much for the rest of the world. The dirty USD peg of China will leave many trying to figure out the role of the USD and EUR and other FX pairs in setting the economy straight. So what happened in the US is interesting in this context – with a weaker USD, a bid bond market and a steady equity market – all those feed the financial conditions index in the US and make it easier moving it away from the tight levels of October. Unfortunately one day doesn’t make a spring and so many will be watching overnight for more information. The SNB, the AUD unemployment – they may be the movers – but the relationships in FX are shifting around from a risk aversion play for USD to a relative value framework for growth. The move up in EUR has technical legs and may surprise many despite the refusal to spend like the Americans. The G20 meeting in London continues to build up as a key event for not just FX but all markets as regulation, stimulus and coordination all will be discussed. The relief rallies in EM FX today remain the largest story of the day – with the move in MXN below 15.15 significant but ZAR the star performer closing at 10.05. The success of today lies in how little really happened despite the wall of worry that hangs over every investor. Oil dropping almost $3 bbl ahead of the OPEC Sunday meeting leaves many wondering if a production cut will really matter. CAD reflects the oil drop more than NOK. SEK stands out as the best correlation to the worry wall. NZD gains even with a rate cut as the easing was expected and the slightly hawkish statement has been taken as the near end of cuts rather than something in between. It’s the in-between that frustrates many as the direction of the next 10% appears to be more a coin toss than a fundamental call on Spring following Winter or good money chasing bad.
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