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Forex Flash: Rise in US equities no enigma – Goldman Sachs

FXstreet.com (Barcelona) - US indices have hit new highs again. What has made this puzzling for many is that the rally has come – at least until the last few weeks – alongside soft data and underperformance of cyclical equities. According to the Economics Research Team at Goldman Sachs, “We think the puzzle is exaggerated – a post-bust recovery, weakness in non-US growth and falling yields have all helped this pattern since mid-2011.” Global data has decelerated, while G4 monetary policy has eased again.

Nor is a rally that is not “cyclically driven” as unusual as recent anxiety – and the 2003-2011 regime – suggests. The mid-1990s saw a long period of strong US equity markets alongside cyclical underperformance, as did the mid-1980s. The case for US equities now is not primarily about strong growth, but about normalization of US recovery with an unusually large spread between yields on equities and the risk-free rate. “We forecast that this gap will close from both sides, with equities and bond yields rising. Moreover, cyclical underperformance should partly reverse, as it has recently.” the team adds.

Forex: EUR/CHF is trading at todays highs

EUR/CHF is up above the figure, taking some pleasure in the Swissie gaining on the back of what seems to be very well received, yet, only slightly better than expected job numbers, coming in at a more positive reading 323k against 325k consensus.
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Forex Flash: Gilts grounded in support though incur long-term woes – RBS

“Gilts reached a strong support region near the 118.64 Fibonacci projection from the February 13 impulse wave; and formed an inside session yesterday, suggesting the selloff should be limited by 118.64 in the near term (below that support would be at 118.00).” states Technical Strategist Dmytro Bondar at RBS.
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