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It has been a fairly quiet morning on the economic news and headline front so it was left to expectations about this weekend's G20 meeting and the prospect of more support from the international community for the IMF's European rescue fund to the tune of EUR500bn to boost markets. As we all know there's nothing like a nice liquidity injection to prolong a rally in the markets, combine that with the proximity to next week's ECB LTRO auction and we may just see the Dow Jones close the week above 13,000.

We will discuss the benefits or not of the ECB's LTRO (criticisms include that it is condensing the central bank's risk in Europe's periphery, it also encourages banks to load up on sovereign debt so hardly de-risking their balance sheets) in another note, but for now those who missed the first leg of this risk rally want to get their piece of the action so may well try and push it on for a bit longer. And price action doesn't tell us to fight it. US stocks are being led higher by the NASDAQ and the Russell 2000, which are traditional lead indicators of stocks.

Liquidity combined with a willingness to turn a blind-eye to Greek problems is helping fuel this rally not only in stocks but in peripheral bond yields and also in the euro. EURUSD seems to be on the way to 1.35 after convincingly breaking through its 100-day sma at 1.3320 yesterday. It's barely stopped for breath since and is now above 1.34. Although there have been bouts of profit-taking dips so far have been shallow.

The dollar is weak across the board, but in the battle to the bottom of the safe havens the yen is winning, down more than 7% this year on a trade weighted basis, versus a 3.5% decline for the greenback. Hence USDJPY has managed to hold on to gains even with the EURUSD where it is. The break above 80.50 now opens the way to the critical 80.95 level. A close above here - the top of the weekly Ichimoku cloud - is the game changer. It opens the way to 85.00 and would likely cause the crowd to try and push this pair another leg higher. This is our one to watch for the weekend.

Fed member Bullard has been on the wires this morning, he is saying that unemployment is likely to continue to tick lower in the US this year and an unemployment rate below 8% is possible along with a healthy 3% growth rate. But that doesn't mean that QE is taken off the table - the Fed still has that card firmly in its back pocket.

The other news dribbling out of Europe is that the German finance minister has said that another Greek bailout is a distinct possibility in the future. Also Germany is holding out on boosting the Eurozone's firewall although Berlin has mellowed to combing the EFSF and ESM to one super fund that would total EUR750bn, add in the IMF top-up of $500bn and there's the chance the Eurozone's firewall could top the 1 trillion considered necessary to stop contagion. Of course this is just the first line of defence, the more pressing problem (and the one, if solved, that would generate long-term stability in Europe's debt markets) is growth and after the revision lower to the EU's 2012 GDP projections yesterday that issue is still looking fairly grim.

Otherwise, Germany and the UK GDP both saw 0.2% contractions in their economies in Q4. But Q4 seems so far away now that markets are rallying and Germany, in particular, is showing signs that 2012 could be one hell of a recovery. For the UK the picture is still bad, just less bad for 2012 than it was for Q4 2011.

Best Regards,

Kathleen Brooks| Research Director UK EMEA |

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