Yesterday there seemed to be opportunity everywhere. I wonder whether EUR/USD has got too high. It is driven by the real interest rate differential and US inflation expectations and European rates — both of which had been rising and taking the market upwards — have both paused in their rallies. I wonder whether GBP/USD has got too low. It has been carried down by an increase in inflation expectations following Mark Carney’s recent speeches, but inflation expectations have taken a pause and there is a limit, some time, to how far they can go. I wonder whether European equities have gone far enough. They are not rising with US equities and perhaps are not benefiting from JPY flows.

It was also an interesting day for modelling. I have made some interesting models of the behaviour of the RBA, which seems concerned with inflation expectations and non-mining employment. I had also been wondering about gold, which normally moves with long-term US real interest rates. Actually, it is still doing so; but the parameters on the relationship change, and I assume that they change with something. I plan to search again for that something.

Short of time today, so here is a quick summary of the data. UK unemployment rose to 7.8%, d.e., but the trend still appears to be downward. The MPC minutes were released this morning but I have not got to them yet. China’s FDI was down 7.3% YTD/Y, the lowest number since 2009, although one has to be careful at this time of year because of the disruption caused by the Spring Festival. Japan’s trade deficit narrowed, although less than expected; a lot of this is the energy deficit, and an analyst quoted by Bloomberg suggested that Mr. Abe will restart the nuclear reactors after July’s Upper House election. That would make sense to me.