[DanRath]

The macroeconomic data have struggled relative to expectations over the past couple of trading days. China economic data have presented a mixed picture. Data relating domestic activity - Fixed Asset Investment and retail sales - surprised the market to the upside while data geared relatively more toward external activity - industrial production and exports - surprised the market to the downside. E16 industrial production and US retail sales data surprised to the downside yesterday. Part (not all) of the weakness in the E16 industrial production was due to backward revisions, but the data do emphasis the extent of the economic slowdown in the euro area. The US retail sales data indicated a broad-based decline in discretionary spending.

The mixed picture presented by the macroeconomic data is providing investors with the opportunity to take profit on risk-correlated trades established during the recent rally. Traders do not expect a large unwinding of risk however and the risk of a large unwind of FX carry trades over the next four weeks remains low. So a sell off in risk-correlated trades could provide the opportunity to establish medium-term long positions.