For most of the summer, as went the S&P so went virtually all aspects of the “risk trade”. Today is the best day for the reflation trade in weeks, and while currencies participated for the first few hours, the correlations are beginning to break down.
USD/JPY and EUR/JPY are trading at their highs as one would expect but the broad dollar index is actually UP on the day. Could it be that good news for the US economy is finally good news for the dollar? One afternoon does not make a trend, but it is beginning to feel that way.
EUR/USD is down 70 pips from uts intraday highs and is back close to the 1.4215 level that seems to attract EUR/USD like a bug-light attracts moths.