We get these momentary blips in risk assumption every so often but for the most part they are mirages amid a wide and barren desert. Once these short-term pops in commodities, some fugazy freight index, hopes for some government package run their course, prices tend to revert to risk averse territory. Stock prices and bond yields fall, safe haven currencies like the USD and JPY outperform and commodity currencies under-perform.
In the absence of credible bank bailout plans on both sides of the Atlantic, it seems markets will risk aversion is the markets default position. Something quiet drastic will bee needed to change that predisposition, especially now that the new administration has proven as poor in communicating with the markets as its predecessor. Change will need to take place before hopes are raised again.
EUR/USD trades at 1.2835 amid nagging risk aversion. All-day hearings on CNBC show our government at work; nothing erodes confidence more quickly than seeing mass ineptitude on display.
