Talking Points:

• Risk aversion reared its ugly head in equities this past session, but the fear wasn't very contagious

• Despite key event risk like EZ GDP and US CPI, rate expectations continued a general trend of compression

• Rate expectations and risk trends may struggle with complacency, but some trends are better set

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A sharp drop from risk trends had FX traders looking for volatility amongst the majors. Yet, the masses refused to bite having become quite acclimated to provocative counter-moves that routinely fall short of momentum. At the same time, trends arising from divergent monetary policy bearings surrendered their drive to a compression in yields. While short-term ambitions have been put on hold, the medium-term trade potential remains. A risk aversion move would be far more violent and self-sustaining than a 'risk on' outcome; and the recent shift in central bank bearings has considerable premium yet to play out. We look at how the trade picture changes for pairs like EURUSD, GBPUSD, EURJPY and others as volatility changes around major themes in today's Trading Video.

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