From gold to copper, risk trades on FX, stocks (except US bonds and the US dollar). At the same time market is showing signs of price volatility and nervousness.
Market distortions from the US Federal Reserve (money printing) and China (bubble) with total US dollar weakness is throwing havoc into all risk crosses (FX) .
As discussed in FX currency Wars - A major South America FX intervention on the cards (1) the EUR and global stock markets are rallying on USD weakness. But our central bank 'geniuses' will send the global economy further towards turmoil
refer WSJ 6th October 2010:
The developed world's central banks are moving—at varying speeds and intensity—to respond to a weak recovery, reduce the risks of a global deflation and restrain their currencies from rising against those of their trading partners.
On Tuesday, it was the Bank of Japan's move. Anticipating that the U.S. Federal Reserve will resume large-scale purchases of U.S. Treasury bonds and confronted with strong domestic political pressure to spur growth and restrain a rising yen, the Japanese central bank launched a bond-buying program. It said it would spend 5 trillion yen ($60 billion) to buy government bonds, corporate IOUs, real-estate investment trust funds and exchange-traded funds—the latter two a departure from past practice.
"If a central bank tries to seek greater impact from its monetary policy, there is no choice but to jump into such a world," said Masaaki Shirakawa, governor of the Bank of Japan.
Central bankers elsewhere are strongly indicating that they are preparing to open credit spigots to reflate their economies at a time when fiscal policy is stalled or contracting."
Outcome? All out war: protectionism, FX intervention and geopolitical tensions. Markets will hit volatility levels as USD weakness sends markets into panic.
An iceberg is looming.
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