The week of October 4th

Barack Obama must be having a hard time sleeping this weekend. The Economist fittingly featured an article last week titled "The loneliness of Barack Obama". With all his key aides leaving to kickstart/restart their own pursuit of happiness, Obama must truly be alone. With his popularity ratings of 41%, which is in any case an all time low for the first term of any president, he now will soon have to seriously consider signing up for some further quantitative easing adding to ire of the public in America.

The big numbers came out on Friday; the non farm payrolls. While the unemployment percentage held at 9.6%, all the other figures disappointed as the non farm payrolls dropped by 95,000 in September. Although a number of (76,000!) temporary workers for the 2010 census are also included in this figure, thereby not leading to any great alarm in the markets.The numbers only confirmed the downward trend in the recovery process for the US, and this has further lead to a consolidation of the ongoing rally in the Euro/Dollar and GBP/Dollar markets and crude oil. With the dollar taking a severe beating from all sides, it has been recording lows against the Yen and the Aussie Dollar as well, albeit for slightly different reasons than the aforementioned spreads. 

There are clear indications that further quantitative easing is coming and with the market mantra this week being "dont fight the Fed!", the S&P 500 and the Dow have both consolidated at a confident and comfortable 1165 and 11000 respectively. This counterintuitive rally has been due to expectations of the dollar further weakening in the face of QE2 leading to a party for US equities. 

The ECB and BOE have maintained their rates in their latest announcements on Wednesday. The BOE has clearly indicated that they would prefer a broad scale asset purchase programme to infuse liquidity into the economy, instead of concentrating on further lowering the rates. The zero lower bound is a clear and present danger to the Europeans and they are more than aware of the limitations it presents (albeit the Japanese think otherwise, with their recent lowering of rates to 0%-0.1%). 

Meanwhile, the new feud in the developed world now termed the "currency wars" rage on, and promise to make the coming weeks an interesting proxy battle. Dominique Strauss-Kahn of the IMF has accepted the role of enforcer in this all out battle against currency appreciation, and it remains to be seem whether he will be victor or victim to this collective madness that is clearly going to be an impediment to a faster global recovery.