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Daily Market Commentary

US$ seem to be reacting to the massive credit problems and are turning sharply lower this morning against every measure.  Euros and pounds in particular are stronger.  All these credit writedowns, and the additional debt that the US government will be taking on if/when they backstop FRE/FNM debt are very bearish for the U$. 

  The liquidity that the Treasury will have to pump into the system (or already has pumped into the system) is very inflationary.  Also - the backing of the Fed's balance sheet continues to be deteriorated as they take on more and more CDO's and random mortgage debt instead of the Treasuries they usually own.

  Tons of data will be coming out in the next two days, including the Bank of Canada - so we will have lots more than the standard fare of financial messes to feed on.  For starters:

US Producer Prices came in higher than expected in the headline (9.2%) YoY, but slightly lower in the core (0.2%)

Retails Sales disappointed, and last month's was revised downwards.  The data is mostly disappointing, but a this point, most have been expecting disappointing.  Short bonds are trading higher, while longs are mostly unchanged.  This makes the yield curve steeper in the US.  Canada is holding steady waiting for the Bank at 9am.

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