-- Financial markets adjusting to the half-yearend and setting up for the second half.
-- Global economy has been uneven, but generally most economies have hit bottom and are recovering.
-- Markets moving back in a cautious risk assumption posture.
USD:
-- Latest Fed statement took a slightly more hawkish tone. No rate hikes in the cards yet.
-- Employment data on Thursday likely to show May improvement was partially a statistical fluke. Employment loss on the order of -450K would not be surprising.
-- Recent improvement in the tone of the bond market bears scrutiny. 4.0% in the 10yr note is the pivotal level.
JPY:
-- Declining trade surplus reduces capital export (JPY positive).
-- Deflationary pressures persist.
-- Economy bottoming.
Click on chart for two year history
EUR:
-- EUR/USD 1.40 the tipping point for the markets.
--.Key ECB meeting is on Thursday. They talk tough but have badly overestimated the strength of EZ economy. Watch what they do more than what they say.
-- Tight EUR/USD to S&P correlation has been working only intermittently.
Click on chart for two year history
GBP:
--
-- Final 1Q09 GDP surprisingly weak.
-- Brown government in crisis. Could fall at any time. More conservative government could be seen as GBP positive.
Click on chart for two year history
CHF:
-- SNB concerned about weakness of the economy, but CHF tied to EUR.
-- Expect SNB intervention at any time to hold EUR 1.50 line vs. EUR.
Click on chart for two year history
Business Cycle Trades:
-- CAD, AUD and NZD business cycle trades come into favor when markets in risk assumption posture.
-- Crude $70 line pivotal
