A very dull day yesterday in terms of price action in FX, however an interesting movehigher in US yields over the course of the session leaves us with less conviction on theusd than we have had for a while. Whilst the Fed should be a non-event tonight interms of real market moving news, question is whether the correction in US yields isover, but more interestingly for currencies can global fixed income keep pace with amove lower in US fixed income and thus change the narrative for FX marketssomewhat from Q1. The jury is out, and that leaves us a little closer to home for now, Ihave reduced euro longs for the time being, retaining a core long whilst the price actionremains reasonable on a 1.20 handle. If we break higher through 1.2120, think that willbe instructive for the next move in the euro and would consider building the positionback up, whilst below 1.1980 and we are in for a further period of consolidation.
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