FX markets were mixed at the start of the trading week with trading volumes remaining thin and directionless. While the images being broadcast from Egypt remain engrossing, from a trading perspective, markets are fading the risk and unless the situation radically shifts we suspect Egypt will take a back seat to other drivers. One such catalyst could be the undetermined role of Egypt's most prominent opposition group, the Muslim Brotherhood. The overall situation seems to have calmed down significantly from last week's violent protests and the military seems content to remain on the side-lines. Friday's US payroll numbers fell well short of expectations, adding only 36k new jobs vs. 146k expected; yet the unemployment rate dropped sharply to 9.0% vs. 9.5% expected. USD trading immediately after was confused, but eventually the dollar bulls latched on to the solid employment rate fall and rationalized away the poor payroll figure due to weather related issues to push the greenback higher. US treasuries reacted to the superficially positive number as the 10yr jumped above 3.66% - a level not seen since mid 2010. This move illustrates the market's migration away from the risk aversion theme to one of being driven by interest rate differentials. Given the recent round of elevated inflation levels in the EU and UK, both the recently hawkish ECB and BoE are expected to move forward on tightening way before the Fed and BoJ. We continue to look for opportunities to buy the EUR & GBP primarily against the USD and JPY. The CHF is also a prime selling candidate with the large EU sovereign risk premium built in (USDCHF is currently testing a 3-month trend line around 0.9590). In Australia, retail sales were weaker than expected overnight at 0.2% m/m vs. 0.5% expected, prompting traders to once again pare down their predictions for the RBA's rate path. Considering the rash of economic catastrophes that has besieged the country for the last few months, we see the small erosion in a notoriously volatile indicator to be a positive sign. After the MPS released last week showed that the RBA had kept growth and inflation forecasts unchanged (or revised slightly higher) we continue to believe the market is overly dovish in positioning, and expect the AUDUSD to break the 1.0265 resistance near term. Last week's EU summit ended pretty much as we expected, with no comprehensive agreement. However, EU officials had been clear that most expected the agreement to be finalized in March. The economically strong members, led by countries Germany and France, controlled the agenda with demands for strict economic governance of all members, while the permanent crisis-resolution scheme was placed on the back burner.