EUR/USD rallies are quite limited this morning, barely 25 pips after a 200 pip fall overnight. Traders see selling from corporates on both sides of the Atlantic today and note that some of the more speculative Asian sovereign accounts turned EUR/USD sellers overnight after 1.4480 was breeched. The fact that EUR/USD could barely muster a reaction by a Chinese central banker saying that the dollar would continue to fall and that they were growing reluctant to buy US debt, tells you all you need to know about the present state of the market. The sellers are selling because they have to, not because they want to. It is a liquidating market, and a liquidating market at the end of December can move further and faster than you can imagine.
US Treasuries are trading firmer at the long end of the curve this morning despite Chinese comments, reflecting the stronger dollar and lower commodity and equity prices. Markets look to be coming back into sync once again, but in a different direction from the dominant trend for much of 2009.
