Late yesterday the financial markets were disappointed as the US Fed rate cuts were not seen as as aggressive enough to help the economy and credit markets. A cut in the Fed funds rate was expected and received but a bigger cut that the 25bp in the discount rate had been hoped for in order to ease the strain in money markets apparent at year end. Stocks and carry trades took a hit from the Fed's more cautious loosening of policy, driving the Yen higher as the market unwound short positions in the low yielding Japanese currency used to fund purchases of higher yielding assets. However overnight we have seen some recovery of the USD against the Yen and also some comeback by the high yielders from last nights lows. Overall the big picture for the USD remains pretty much clouded but we continue to favour USD negative positioning whilst respecting the T/R breaks.