[LehmanBr]

The biggest shift overnight was the number of people turning from JPY bulls to JPY bears. The driver has been risk and EUR/JPY, where JPY as a risk barometer beats out JPY as a focal point of the new Japanese administration. The inability of JPY to break 90 means many see 95 as the logical next test in the medium term. The rally in equities has put this into play. Also many are worried that the USD selling vs. EUR and in EMFX overnight may be near a tipping point for a correction. So JPY becomes an attractive counter weight in the portfolio. We got nothing from the SNB – but a repeat of their promise to counter the CHF appreciation. Key is how much intervention vs. how much talk. Risk-on thinking dominates this week with the retail sales, IP mix being supportive of a recovery. The cracks remain political as the war of words on trade hit one side and the expression of US defense policy the other. Shift of the US on missile shields in Czech and Poland worth watching as to price of oil, Iran, Russia interplay. Also worth watching is the Nikkei story on the US/Japan secret defense agreements – likely now gone – for fall back plans on nuclear weapons, Korea, China. The risk of protectionism of trade and defense makes USD vulnerable still. The European trade surplus telling as exports go up and imports contract – is the US the only increasing importer? All this leaves that sinking feeling that everyone is happy with the global recovery as it unfolds except those that don’t feel it now. US Jobless issue remains a key driver of this fear and likely will gnaw at the politics of the US until fixed.