The Economy and The Credit Market

Optimism surrounding an eventual economic recovery is growing; but all those making positive forecasts do so with a disclaimer for timing and barring any unforeseen events. These stipulations are perhaps as important as the general concept of a recovery itself; and therein lays the source of the market’s next dominant fundamental theme. Will the US economy recovery before its G10 counterparts? Is there a next shoe to drop? And, if that is the case, will the dollar take the role of safe haven or growth candidate? These are the questions that all fundamental market participants will be asking themselves; but that the greenback traders in particular will be attempting to discount. Over the past week, the outlook for the US (compared to the rest of the globe) improved modestly on a smaller than expected drop in May payrolls and the in ‘tolerable’ shortfalls of those 10 American banks that failed the federa reserv's stress test.However, it is important to realize that the recovery in risk appetite is fully derived from speculation of future growth, earnings and returns. Things could fall apart quickly…