This had an instantaneous influence on the Euro/US$ (We should disregard the bad US$ EV print that occured after hours).
Money also rotated out of fixed assets to move into the large caps equities, which are the only safe space to be for now.
The small caps, which had been under constant pressure experience and epic shorts covering rally.
US Treasuries continued to be under pressure,
But so are most of the fixed income equities.
The consequence of a very weak US$ continued to be felt on commodities that are priced in US$.
We can see below that since mid of December rates have been up in the US, Europe and Japan.This could put a stop to Nirp refugees pouring money into US assets.
We can also note that 200B$ came out of Excess Reserves on the week of December 20.
Conclusions:
Assets class rotation from fixed income has accelerated after the rumor regarding Chinese Treasuries holding policy. Money from Excess Reserves has also helped push equities higher.
In theory, higher rates combined to QE unwind should be deflationary. That is clearly not happening for now. Is it possible that a plunging US$ is going to trigger imported inflation? This is what happened in UK when the Pound dropped on Brexit fears.
We can see below that TIPs (Inflation protected Treasuries) are slightly being bought here.
On a side story, Biotech display a negative Money Flow.
For now, it is unwise to short the markets. Buying on pullbacks could still work.
Steve suggested such an idea on FB:
http://www.effectivevolume.com/showt...ed=1#post32661
