Ironic

It's ironic that although Cyprus is certainly the focal point, it was Italy that sent the EUR/USD below $1.28 and to at least a 5 month low. This was clear in my post last night, the FX pair was showing a lot of indecision and as of my 1 a.m. post it looked to me, as I posted, that it had made up its mind as to direction as it lost ground.

I talked a bit about Italy last night, what I didn't know was shortly after my late night/early morning post, Italy was going to pull the tug from under the market. Economic Reports were horrible...

Industrial Sales and Orders fell far below expectations posting numbers of -1.3% and -1.4%, respectively, on expectations of an increase. Retail sales declined by -0.5% in January on consensus of  unchanged and December 0.2% print was revised into negative territory.

As I was talking about Cyprus yesterday, I ended with a reminder that Italy STILL DOES NOT HAVE A GOVERNMENT, Bersani was charged with forming a coalition government with Thursday as a deadline, he said the possibility of a broad coalition government DPES NOT EXIST and there can be no lasting government without him leading it a premier. Bersani asked Grillo's 5-Star coalition not to block his aspirations to which Bersani shot him down completely, saying there would be no support from 5-star for a coalition and furthermore they would cast a vote of no confidence for Bersani.

Next there were more reports of police searching Nomura in Milan in connection with the Monte Pasci case and to top it off, 2 10-year auctions were not covered and had some of the worst internals since 2002.

Greek bonds are seeing yields climb as we see again a flight to safety and away from risk-Remember BlackRock yesterday dumping EU bonds, Greek bonds are hitting yields of nearly 12.7% and their stock market haas dropped 20% over the last month. Additionally German 2-year bonds are at sub-zero readings, a negative yield as investors flee to any kind of safety they can find to park their money, even if they have to pay to lend Germany money!

The Bank of England added more gas to the fire in saying overnight that their banks face a capital shortfall, this is essentially the same story that started in Spain and consumed Cyprus, banking capital shortfalls.

Cyprus' banks are scheduled to open tomorrow, it will be ugly as the Russians have pulled billions out while the EU wasn't looking, the problem is "Fractional Reserve Banking", which essentially means the REAL tangible currency to meet customer's demand for their money does not exist. If you don't understand Fractional Reserve Banking, look it up before Cypriot banks open tomorrow, it may be very important.


Here's a list of some of the Capital controls that were voted on and passed last week:

• *CYPRUS CONTROLS APPLY TO ALL ACCOUNTS, CURRENCIES
• *CYPRUS BANK CONTROLS INCLUDE CURBS ON CASHING CHECKS
• *CYPRUS BANK CONTROLS TO BE IN FORCE FOR 7 DAYS
• *CYPRUS CURBS INCLUDE BAN ON ENDING TIME DEPOSITS
• *CYPRUS CURBS TO INCLUDE PAYMENTS ABROAD

Also it is said no one will be able to carry more than $3000 Euro's across the border.

Also remember we are at Quarter's end which means window dressing or, "The Art of Looking Smart"