Brazil will hold an auction to buy dollars today against the Real, once again replenishing reserves sold during the crisis. As Saferanger points out, risk measures in the markets like interest rate differentials between market and official rates are compressing and volatility in the equity market is dropping.
All this implies a “return to normal”. Now we just have to figure out what normal is…
GBP is a clear beneficiary of the return to normal; so is the AUD. Less clear is the euro as structural rigidities in the euro zone will remain a problem long after this crisis is past. It is a problem for the dollar as well as the new Administration is making such sweeping economic policy changes that it is difficult to compare the “old” US economy with the “new”. Should make for exciting trading in the months ahead as we seek the new normal.