The Doubt Point

You have to wonder if Obama's career has kept him too far away from rearing his kids, because the first thing you learn as a parent is that the worst way to get a kid to do what you want them to is by telling them to do it and, worse still, by doing it publicly. Of course they are going to dig in their heels. We do wonder if things might have been different if yesterdays newswires weren't full of lines such as "CIA says Mubarak will step down". In a way we quite admire him, but the unfortunate result is that it's another Friday TV viewing day as the markets trade oil, equities, fx and bonds directly proportionally to the number of stones in the air over Tahrir Square. It looks as though Mubarak's truculence will be greeted by a firm smack from the back of his populace's hand.

But maybe he is being guided by a greater force? Read this.

The Euro Bunny has stuck its furry nose out of its burrow again too, with a surprise re-appearance from Portuguese yields. The ECB were swift to act, chasing off the predators and covering up the evidence, but the damage has been done and Mr Market is sniffing around the burrows again. So together with the other ingredients in the titration burette we have precipitated a fairly dense cloud of worry. We haven't reached the full tipping point, but we think all it will take today is one well-aimed flaming rag-topped bottle of octane in a Cairo square.

So what for now? Well, we have completely toned back our EUR/USD view... That last retrace to 1.3750 was enough and returned us to agnostic, which is the way we will remain until we get some resolution from this turn we are so expecting across risk in general. The same applies to rates. The gloves are off and we are grasping a Sebatier carving knife of USTs. As mentioned yesterday, the IBEX/DAX cross is off the table waiting for better re-entry levels and the EM/DM trade sees reducing of the shorts on the EM side as it's getting so much cheaper. As for DM Equities, we are just soooooo wanting them to fall over, having been on the bull bandwagon for so long, it's time to switch alegiance and play for a move down... How far? Not sure yet and we'll play that by ear, but new highs will have us out.

What else? AUD/NZD? The Bird has been crucified recently on weak data and recessionary comments to the point where AUD/NZD has actually gone UP even as stresses in the rest of the world have increased. The overnight rate moves after Stevens's comments make us think that it has gone a little too far. On top of that, the Copper/Milk ratio looks to be a Kiwi in a Coal Mine (sorry...). Add to that our usual theory that when things get stressy folks get out of their hobby trades (AUD/NZD being one of them, and it's always on the long side); and a very low VIX primed for a spike... So while we are busy shouting "YOOURS" in general on risk we'll shout "YOOOURS" in that too...