Societé Generale - "The US sequester, softer Chinese non- manufacturing PMI data, and on-going Italian political uncertainty are giving us, again, a somewhat risk averse start to the week. We’re in a slightly strange market where risk aversion rules, but major equity indices are in a bull market all the same, thanks to Fed policy. For all that though, starting the week long USD against GBP, AUD, and a raft of other over-priced European currencies (EUR, CHF, NOK) seems the right strategy. Long-term yen shorts remain in place, but USD/JPY is firmly in its 91-94.5 range and an upside break probably requires some action (rather than just words) from the new regime.
There haven’t been any visible signs of progress in Italian government-building over the weekend. Technical analysts tell me that EUR/USD 1.2970 is the big level to watch rather than EUR/USD but either way, with 10yr BTP yields back up at 4.85% as I write, the pressure on the Euro remains."