[MownySue]

Markets will be talking about month-end flows but the surge of important economic data shouldn’t be lost on those that want to trade for more than the next few hours. The shift in Korean IP lower vs. Japanese IP higher will be something to watch as Tankan and China PMI hit tomorrow. But for FX markets the move was all about selling USD out again with TWD the main winner. Shifting policy response will be the main driver to watch for October. The ECB 1Y allotment of 75 bn EUR may have triggered another wave of exit strategy discussions all leading to a slightly stronger EUR. Rates have returned as a key driver of FX in the last few days with Norway, Australia clearly reflecting those stories. Picture in the US will be about whether the market can say jobs are a lagging indicator or not – with ADP out today as one story but the GDP, Chicago PMI probably more important. One factor to consider as we get real economic data that may be stronger than expected is that FED discussions on the exit plan are pointing to a much faster and more aggressive shift – making rate policy more volatile and more data dependent. This should mean trouble in the medium term. For the day its more a month-end flow as many expect bonds to remain bid for duration and for reallocation from stocks. Whether that happens may be the most important story of the day. For FX – getting past 11 am will be the first order with many expecting USD selling given the gains in US assets vs. rest of world. Hedging rather than risk trading will shift after London goes home and in that we may have opportunity for those brave enough to not be overloaded with the present and clear-headed about October. EUR may be the flagship to consider in FX as a leader of larger market moves with many thinking 1.4720 test followed by a larger pullback. Given this is the common wisdom it probably won’t work.