Outlook:

Basic economics are starting to get a grip, hard as that may be to believe in the midst of all this currency war talk. After all, the purpose of accommodation and other stimulus measures is specifically to goose domestic economies. Those who say the conflict between differing policies cannot be resolved are perfectly right. What’s wrong is laying the blame on FX as the end-product. The German remarks are especially interesting and could even imply a kind of guerilla attack on Japan from behind the front lines—Japan’s debt is 200% of GDP, something Germany frowns on. Surely it will recommend deficit cuts alongside stimulus or at least a convincing plan. The US will not escape, either. It’s healthy to force the markets (and politicians) to appreciate the linkages between growth and austerity, preferably in an ideologically neutral way. The BoE and Carney in particular are the leading drivers of this analysis, thank goodness. Surely they can overcome Brazilian hysteria with facts and figures. We are therefore not as fearful of an explosion out of G20 as the press is trying to push us into imagining. The world is actually recovering, not just the US, each in its own way. G20 should stress that if it ain’t broke, don’t fix it. Longer run, this perspective favors risk appetite and is dollar-negative.


SPOTCURRENT POSITIONSIGNAL STRENGHTOPEN DATEOPEN RATEPOSITION GAIN/LOSS
USD/JPY93.74LONG USDSTRONG10 /17/1278.7116.03%
GBP/USD1.5545SHORT GBPSTRONG01/18/13 1.59422.49%
EURO/USD1.3482LONG EUROSTRONG11/26/121.29703.95%
EURO/JPY126.39LONG EUROSTRONG11 /21/12105.3819.94%
EURO/GBP0.8670LONG EUROSTRONG11/26/120.80957.10%
GBP/JPY145.73LONG GBPSTRONG11/21/12131.0211.23%
USD/CHF0.9183SHORT USDWEAK01/30/13 0.9163-0.22%
USD/CAD100.42LONG USDSTRONG01/24/130.99930.49%
AUD/USD1.0321SHORT AUDSTRONG01/28/131.03920.68%
AUD/JPY96.74LONG AUDSTRONG10/17/1281.1919.15%
USD/MXN12.6667LONG USDWEAK02/12/1312.7736-0.84%