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Video: Did the Markets Trip the Risk Breaker and Why Did USD Follow?

Video: Did the Markets Trip the Risk Breaker and Why Did USD Follow?

2014-12-10 01:50:00
John Kicklighter, Chief Currency Strategist
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Talking Points:

• Global equities stumbled Tuesday and many well-known 'risk' assets followed suit

• Full-scale risk aversion is difficult to fuel with expectations of a liquidity drain

• The US Dollar followed suit with the stock and Yen cross drop, highlighting another likely culprit

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Not everything that flies is a bird. Global equities stumbled this past session alongside the Yen crosses, high-yield fixed income and emerging market assets. These different markets share a few common traits outside a general appetite for investors for higher return versus a greater concern over risk. As such, their alignment is often considered a sentiment based move - which can carries the virulent potential to escalate into full-scale deleveraging. Risk aversion may be at the root of Tuesday's correction, but follow through is dependent on conviction and scale. Will the ranks bow to fear? Furthermore, what does the USDollar's retreat amidst a confidence slump mean? We look at the motivations behind the market's recent volatility to establish our next move in today's Trading Video.

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