Risk assets got more relief this weak and emerging markets in particular recovered strongly. We believe sentiment is still too low on emerging markets, although it is improving quickly following stronger Chinese data.
We believe the Fed's forward guidance for 2016 will be more important than the tapering decision, as bond yields are highly correlated with expectations for 2016 rates. We expect the Fed to manage to keep bond yields in consolidation mode for now through dovish words on employment and housing.
EUR/USD has disconnected from relative rates - we see downside risk for EUR/USD as it corrects closer in line with relative rates.
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