Fed not tightening yet but market is…

Two-year note yields are 31 bp higher this afternoon than the were before the employment report. Comments from NY Fed president Dudley suggesting the Fed can rein in its QE policy if the bond back-up is driven by economic optimism (rather than fear of deficit spending) is helping ramp the dollar higher now as well. EUR/USD has fallen to 1.3950. USD/JPY has broken trendline resistance at 98.30 and cable has dipped to 1.5958. AUD and CAD are being shellacked, perversely, as position adjustment outways upbeat economic fundamentals. The market is just too long the commodity currencies…AUD trades at 0.7955 and USD/CAD at 1.1170.

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