[MownySue]

We have had a flurry of activity this morning. Here are a few highlights:

Bank of England:

• Leaves rates unchanged but increases QE by $50bn which is more than expected

• Market has reacted positively as the BoE is trying to balance QE vs. new issuance. In the end, traders feel the BoE is succeeding: assets prices are higher, yield curve is steep (which implies growth), and encouraging PMI data

European Central Bank:

• Cuts rates 25bps as expected

• Announces QE (but says its not QE?) for 60bn EUR to buy covered corporate bonds which are essentially asset backed debt

• ECB also extends tenor of repos to 12 months as expected

WHAT DOES IT ALL MEAN:

• I am surprised the EUR has rallied as much as it has. A break of the 200 day MA at 1.3475 would be a huge pivot change and open the door for another run towards the 1.37/1.38 levels. In my own opinion though, I just do not truly believe in the rally…as the WSJ pointed out again today, Europe is well behind the US (Spain has unemployment nearing 17%!!!) and although its social programs are much stronger than the US, generally speaking, the US is always quicker to start hiring again. In addition, the Germany is still trying to figure out its "bad bank" plan.

• GBP and AUD are continuing to outperform

• CAD is cruising towards stronger levels. The fact that it did not QE is currently helping their situation. The loonie has appreciated nearly 7% in the past week. The interesting thing to note though, is that CAD is appreciating with the "risk on" trade; not because of Canadian fundamentals which makes me nervous. Oil is rallying on the back of China and supply constraint concerns; however, we need oil back above $85/bbl before the oil sands projects flip the switch to "on."