An eerie calm has spread over the financial markets today as all eyes are fixed on global equity markets. Asia & Europe's regional indexes have a slightly positive inclination but the buying feels more like bargain hunting rather than an actually change in sentiment. The current bout of risk reduction has and will continue to punish asset pairs most heavily associated with the changes in global macro condition - notably AUD, NZD, SEK, NOK and EM currencies. Gold is trading higher to $1200 while US yields grinded lower with the 10yr heading to 3.10%. The direction of Gold and the 10yr yields suggests that market anxiety remains and the search for a perceived safe havens continues . We don't see any significant adjustment to the current trend until tensions between North and S. Korea are mollified and a higher level of EU cooperation is reached. Relations between EU member-states seem childish at best at a critical juncture in the history of Euro. In an interview with the German newspaper Frankfurter Allgemeine Zeitung, European Commission President Barroso responded to Merkel's intention to widen the naked short selling ban by calling the policy naïve. Meanwhile, German Economic Minister Bruderle cautioned that Germany was opposed to issuing any joint EUR bonds because the move could be misconstrued as rewarding members states pursuing poor policies. The continued divergence in opinion among EU officials clearly bids farewell to any hope for an intellectual solution - until an agreement is reached, the current environment will continue to weigh on risky assets and FX trades. Institutional traders have shifted their focuses away from solely Greek concerns and are now evaluating the overall systemic challenges of the EU. In the midst of all this squabbling, the only choice for EU leadership will be the ECB. It is the only institution with the unified capability to relieve mounting financial stresses. The inherent problem with turning to the ECB is that their efforts are focused on solving liquidity issues and direct intervention remains a low probability event. Without any structural changes to the EU, the cosmetic endeavors of the ECB will eventually fail under the weight of market-driven pressure. In the UK, the Queen's speech as always was a ceremonious spectacle but devoid of any relevance. It's apparent that the close-knit nature of Cameron and Clegg will probably cause more harm than good. There are still wide ideological gaps between the two political parties and little evidence of any forward progress on a unified budget. The highlight of today's trading day will be US durable goods and new home sales. We suspect both figure to surprise on the upside, however FX markets will be primarily concerned with stock market reactions to the aforementioned news.

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