Archived IMT (2009.08.07)

But BEWARE of TEMPORARY PEAKS in unemployment rates. In the last recession (as in all others), the unemployment rate showed its first decline in May 2002 (14 months after the recession officially began, before rebounding into most of the ensuing 12 months). See Chart http://twitpic.com/d1aq4 This time, the unemp rate has risen for 17 months. Thus, even if July may not be the first decline in the unemployment rate, +10% unemployment is consistent with previous trends. It is too early to announce the end of the negative relationship between USD and stocks, or the negative relation between USD and bond yields, but todays market action certainly has not been seen since last year. The fact that the unemployment rate showed the first DECLINE since April 2008 and US payrolls fell by the LEAST since August 2008 did away with the traditional risk trade and simply triggered USD bids on the hopes that the US recovery is here to stay. For now, both GBP and CAD ar expected to head lower vs USD.