Imbalances between surplus and deficit economies need to be addressed. If not corrected, they will be a recipe for new “challenges”.
Trichet and his EU compadres have had little success in lobbying China for greater currency flexibility, nor has the US. Chinese data last night shows the crisis has passed and they should be able to resume the adjustment process but continue to drag their feet.
EUR/USD has taken on an easier tone ahead of the US retail sales data. Solid short-covering by short-term funds dominated morning trade but EUR/USD continues to stall on rebounds toward 1.4780/85.
