September capped a difficult month and quarter for risk appetite which triggered a broad sell off in assets. Investors struggled with concerns over deterioration in economic data, pointing to further downside risk and the clear lack of a solution to the European sovereign debt crisis. While risk reduction was the name of the game, perceived safe haven trades continued to flourish. US Treasuries ended up having the best quarterly rally since 2008, with yields on the short end of the curve, right around new lows. USD and JPY continued to dominate demands for safe havens, gaining broadly against commodity currencies and EM alike. Gold was able to rally on Friday but questions remain regarding the precious metals outlook. Other commodities such as oil and copper however, failed to find solace in safe haven flow and continue to fall on the back of weak chinese data.   This week is all about developing events in the eurozone (specifically today's Eurogroup & ECOFIN meeting), the ECB and US critical payroll data. Off the spring board of the IMF meeting, European policy makers seem to be finally moving in the right direction. Multiple parliamentary votes on the new EFSF plan, including Germany's one sided affair, suggested that Europe was united more than the market appreciated. However, the bi-polar public discord on the use of leverage to extend the potency of the EFSF, highlighted that the unified front is far from secure. A fact which took the optimism away from the critical votes and disappointed the market. We suspect that these meetings will do little in moving the EFSF solution forward and with big question marks around the Troika and progress in the Greek austerity plan, we remain bearish on the EUR.    Thursday will be Trichet's last meeting as the ECB chairman, which adds its own element of uncertainly. Despite last week's surprisingly strong inflation data, we expect the focus will remain on the mid and long forecast which should allow pressure to subside. We do believe the ECB will lower rates twice, in Dec and March, but will limit loosening this time around to non standard measures and not shifting the policy rates. We believe Trichet will be mindful of setting a course before Mario Draghi has time to take the reigns. EURUSD is highly sensitive to interest rate differentials. While a shift in expectations will have a minor effect on the EURUSD, a full 25bp policy rate cut, will push the pair significantly lower.    In the US, a mix bag of economic data, combined with a trend of downside surpasses in NFP, has skewed expectations to below 50k exp. While we don't expect a negative number, we think the current forecast is overly optimistic. Whatever happens, including ISM just hovering above 50, will mean that economic conditions are weak enough for the Fed to pull the trigger on QE3. Friday's comments by the Feds Bullard that the central bank never runs out of options and confident that further easing would work provides insight to the FOMC current thought process.      And on a final note, it's universally expected that the RBA will hold policy rates at 4.75%. While much of the world struggles, the Australian economy continues to print decent numbers. So this will put the emphasis on the accompanying statement as to insight into the RBAs perspective on global risks to destabilize the Australian economy. And on this front we could see a very gloomy outlook and therefore a more dovish rate path. Without support from rate expectation, the AUD could come under renewed selling pressure.
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