09/20/2009 – Increasing signs the risk rally is stalling

* Increasing signs the risk rally is stalling
* Mixed signals from Japan’s MOF
* Still a troubling trend in US economic data
* GBP gets thumped by the BOE
* Key data and events to watch next week

The greenback remains under pressure as the global risk rally continues. Concerns over the US fiscal deficit, the status of the US dollar as the primary global reserve currency, and near zero US interest rates all provide background noise to encourage USD selling, but the real source of USD weakness is the ongoing improvement in risk appetites globally. While we strongly believe that current risk asset market gains are overdone and ripe for a correction, solid indications of a pullback are tenuous at the moment. However, we would note that the ratio of the S&P 500 to its 200-day moving average is at historic extremes last seen in May of 1983, which was followed by a 2.5% decline in the following week.    Full text »

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