Key News
*Dollar and yen rise on move toward safety (MarketWatch)
* Trichet Says Global Economy Is Near Turning Point (Bloomberg)
*HSBC Says 2009 Will Be ‘Tough’ as U.S. Bad Debts Rise (Bloomberg)
*Latvian GDP Shrank 18% in First Quarter, EU’s Biggest Fall (Bloomberg)
The Event Agenda
The Morning Run-Down
The markets this morning are giving back some of the exuberant moves from Friday. The dollar index breached its 200-day moving average on Friday and stops that triggered on longer term passive positions exacerbated the move lower. The move in the dollar, along with the strength in stocks have stepped up the volatility in currency markets this morning.
The currencies have technically outpaced the stock market, in cases, breaching important levels, however the stock market acitivity is leading the way for currencies right now. And the stock market remains contained by major resistance. A petering out of this stock market rally will likely make these technical breaches in currencies immaterial….as the entire “risk” trade will reverse. That means lower stocks, higher treasuries, a higher dollar and a bounce in credit spreads.
This week we get more substantial data—more demand related as opposed to confidence related. We will likely see price pressures to continue to yield toward deflation, manufacturing to show major weakness and global trade to continue a rebalancing act. The timing should work nicely for an exhausted risk rally scenario.
Dollar Index
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