We worried yesterday that the shift from dollar weakness on the deflation trade (less deleveraging) and toward outright dollar weakness would take time and add confusion to the market. If looks as though the shift took less than a day.
Th buck is showing renewed weakness across the board as EUR/USD traded back above the 1.3800 level despite a 1.5% pullback in stocks and a decline across the spectrum of commodities,
The bond market is selling off as buyers go on strike ahead of major supply ($101 bln) which has to be absorbed next week. In the wake of the S&P action on the UK. Rising debt and deficits are firmly in focus.
Everyone knows debt and deficits rise during recessions. What traders are not yet able to quantify is the impacts of the dramatic expansion of government into the health care, education and energy sectors. That makes it difficult to predict how a recovery will play out.
