Current marketconditions (ex Latvia); follow the flow.

* Discounting the Latvia IMF loan without strings

Have to believe that Latvia will receive their IMF loan with no strings attached. Utterly irresponsible if you ask me. Further lowering the credibility of the EU especially, but also the IMF, for not standing their ground and insisting on doing the right thing - theyve been there, done that.

The IMF has had plenty of experience from scenarios like this. They should know better. They know how it will end - in tears. They bear a responsibility to stop this tragedy unfold any further. I doubt they are strong enough to do it.

In discounting the approval, I will trade accordingly. We already saw an improvement in general market sentiment yesterday. Hence, the realmoney flowtheme is still in play. Ill go with the flow.
Even better if I dont believe the story.

Disclosure; I am long Eur/Lvl FX Forwards.


* Selling the JPY as the US yieldcurve goes flatter

Japanese financial institutions and Lifers are likely to divest further into overseas bondmarkets in their hunt for yields as the US yield curve has gone flatter.We could be seeing strong datapoints going forward, creating a market consensus that "the worst is over".

This financial market rebound and inventory adjustment has to a large extent been driven by public deficit spending. Real money cash liquidity seems to be waiting on the sidelines. They might soon have to start buying assets,,,,,,,, Improved IMF funding will also add to the positive sentiment.


* With the current bullish sentiment remaining and a consensus conviction growing that "the worst is behind us", no wonder inflation is "in" again. The real issue to me is still deflation though.

Todays release of Chinas PPI (-10.4% Y/Y) and CPI (-1.4%) Y/Y seems to support that view for now.


*New positions and position changes
- Added to my long SAS stock
- Added to my long Usd/Mxn position
- Long Usd/Zar


As always, good luck






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