31. Euro Stress Part of dollar’s strength is due to the fact that Euro is losing viability. Can a currency without a country survive a steep economic downturn?
32. UK Mess The hedge fund economy blows up… Source: Bloomberg
33. UK Mess … but maybe it’s hit bottom. Source: Bloomberg
39. Carry Trades Is Mrs. Watanabe turning short? Source: Tokyo Financial Exchange
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42. EUR/USD Up-Down? UP DOWN EZ economy stabilizes as North/South nations create a coordinated plan of action and faith in the currency is restored. US economy responds to stimulus, first to rebound from global recession. US Treasury Auction fails as investors refuse to absorb any more US Sovereign debt capital flight ensues. EZ union nears collapse as economic stress creates political backlash, member sovereign credits come under assault. Global capita markets rally, risk assumption returns as doomsday fears dissipate. Dollar remains repository of safe haven funds as global economy remains mired in a protracted recession.
43. GBP/USD Up-Down? UP DOWN UK economy stabilizes – PMI’s a clue? Quick monetary and fiscal response, lower pound yield positive results. UK economy remains stuck at very low production rates as demand is curbed due to persistently high jobless rate and growing debt burdens. Global capital markets stage a rally. London resumes its role as the financial intermediary to the world. Global capital markets remain bearish – BOTH equities and fixed income continue to fall. Capital leaves the dollar on US financial concerns. High leverage of UK consumers and massive issuance of sovereign debt trigger capital flight.
44. USD/JPY Up-Down? UP DOWN US economy bounces, Dow rises, US 2-year rates increase to 3.5% reviving demand for carry and yield. Risk Aversion reigns supreme, Dow dives to 6000 or lower. Japanese economy recovers slightly prompting return of risk appetite. US economic fortunes do not improve, credit contraction creates massive deflation of US assets. BOJ intervenes as strong yen hurts exporters. Repatriation of Japanese funds continues unabated as world sits at ZIRP.
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