Markets are trading in a lethargic manner as participants continue to nervously take on risk-correlated trades. The move toward risk is logical because without the massive sovereign crisis fear hovering over the market like the Sword of Damocles, one needs to consider the fundamentals – particularly monetary policy, as the core driver. Overall, the rate at which central banks are mopping up…

Risk correlated trades had a strong showing yesterday as banking stocks rallied and concerns over the inadequacies of the Stress Test dissipated. The USD lost ground to both the GBP and EUR while longs in JPY and CHF were equally cut. Risky trades continued to benefit throughout the trading day in spite of US Consumer confidence data coming in negative. We especially like the appreciation we saw…

Just as the stress test advocates were getting ready to declare Friday’s results a success due to a selloff in USD and rally in equity markets, we then ran right into a summer whipsaw. The broad majority of G10 currencies sharply reversed their brief trends with today’s European open. Yesterday’s wave of risky asset investing lacked any solid drivers, so the momentum was bound to falter….

The substance and meaning of Friday’s Stress test results are still be hotly debated. Financial pundits are putting enormous emphasis on the European open as the barometer of the market’s sudden confidence in the results. We are still unconvinced about the stress tests and doubt that a single market open/trading day will create the directional rush some participants are looking for. FX markets…