Forex: Yen selling dominates in silly season; US cliff clock ticking (Barcelona) - Two different perspectives of risk we are seeing right now from currency markets, bonds and equities as of late. On the EUR/USD, it is mostly unchanged in a very low volatility environment, although with plenty of news going on, while European equity indexes such as the DAX, are moving back at year 2008 high levels, or Hang-Seng index today up +0.69% for the session, near 5 month highs, as well as Nikkei index at 8-month highs right below the 9800 points mark.

Technically, EUR/USD keeps limited so far by the 1.3100 ask line, last at 1.3096, which, in case does not break above soon, says Independent Analyst Richard Lee, could "prompt a decline to initial support at 1.2988," the analyst notes.

At the same time, US 10 year yields are above 1.7%, around 1-month highs, as risk appetite lowers demand for US Treasurys and thus yields rise, same for USD demand, except against the Yen, in what some are already calling for the beginning of the return of the Yen carry trade. If it wasn't for the Yen, currency markets would be mostly dead in volatility terms.

The Yen tanking in recent weeks has been driven by speculation that opposition party will win a majority in the elections in Japan, and latest polls show they very likely will, and so they will push BoJ to strengthen stimulus policies, in order to achieve a 2% CPI target, thing some analyst are already calling not to be a very realistic idea. Anyways, today's Tankan data confirms in some way Japan is in recession, and wont be easy to pull those last months of deflation off.

The schedule for the ECB banking supervision goes to as long as March 2014 to see things working, and lot of meetings and EU parliament approvals have still to happen in order to start walking, never before 2013 1 Q.

In the European side, another Eurogroup meeting finished late at nite in Brussels, with something clear in mind: there will be more meetings in the near future. That is for sure. Even European Commission President José Manuel Barroso said as finals words during the press conference at the end of the meeting that "the decisions were not expected for today," and further discussions will have to take place, starting as soon as this Friday. At least Greece will have by next week the € 35B loan aid tranche handed in order to keep payments up to date. That for the good news.

In the other side of the Atlantic, though, wont have that much time to resolve an urgent matter putting at risk the current joy in markets, at least in European and Asian markets, as US equity markets are not that buoyant, with SP500 down yesterday a -0.63%, with lack of agreement between Democrats and Republicans about the 'fiscal cliff'. Obama and Speaker Boehner met yesterday for less than an hour with Treasury Secretary Timothy Geithner at the White House, without a conclusive arrangement, thing that in words of Obama “It shouldnt be hard” to get.

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