@Aurelija's

Happy new year.

The first week in the markets was still full of the holiday mood, as many markets people were still on holiday. But in terms of market movements and data the week was nevertheless interesting. In particular, the culmination with the better than expected US job market report. The US labour market is clearly improving and unemployment continues to trend down...


...which is good news. Not only because of the fact itself, but also because of the reaction - the EURUSD fell in reaction!


This is in contrast to many previous positive surprises, where the EURUSD actually increased on the news. The fact that this time USD strengthened could be seen as a sign that the "risk appetite" is no longer a key driver of the USD, which signals less stress in the market. It is the macroeconomic reality that drives the EURUSD - the US is clearly standing on a stronger foot, hence a reflection in its stronger currency. The latter is also confirmed in the interest rate market, where the spread between the EUR and USD interest rates is moving in the USD favour...


Since the first week has not been very "liquid", it still remains to be seen how the year will start in the markets in the coming few weeks. There are some signs, including the macro, that we may get a repetition of 2009, where post-stress rally took off in Q1. Yet it may as well be that the euro area's problems come back with a vengeance hitting the markets with another wave.

Personally, I am up for the first scenario and thus up for refilling my personal portfolio with some US stocks. The only reservation I have, however, that the recent US macro improvement and related positive surprises may come to an end, since the latter was mostly due to the labour market which is, unfortunately, a lagging indicator of economic activity. If one looks at some forward looking indicators like US consumer confidence the picture is not yet consoling.