This market never stops amazing me.....

Well this week, stops continued to grind higher and EM continued to strengthen. Will the madness ever end?

Mexico raised rates 25bp, and the U.S. is expected to lower its rates later (Oct31) this week. I think that the U.S. rate move is already built in and I think a potential opportunity is in the Mexican forwards. I will be looking to sell these forwards (slowly...layering into them) over the next week or so. If I am correct and this will be the last rate change in Mexico for 2007 (with the next one being lower??)then there might be some nice carry situations ahead. There has been alot of paying interest in the shorter end forwards and I think most of the market is funded, therefore leading to an abundance of cashflow in the coming weeks.

For the rest of EM, why fight the fight. Better to get on board and Sell dollars anywhere you can. The Euro is on a never ending quest to new heights and Usd/Asia cannot go low enough. Just like in a riptide, don't try to fight the current, at worst trend sidways till you are out of it's pull. At best go along with it and enjoy the ride !

Good Luck and Good Forex Trading.