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The diverging performance of the US dollar is evident today. Its weakness is concentrated against the euro and sterling. It is firm against the dollar bloc and yen. It is mixed against the emerging market currencies.

US Treasuries are steady after seemingly counter-intuitively firming up a bit after the stronger-than-expected jobs data before the weekend. Asian bonds played catch-up, helped too by the lower-than-expected inflation figures from China (3.0% vs 3.2% in October). European bonds are largely steady.

There were two stand outs in Asian equities. The first is Japan, where the yen's retreat and strong US performance spurred a 2.3% advance in the Nikkei. Japan reported a larger than expected downward revision to Q3 GDP to 1.1% from 1.9% (quarterly annualized rate and 1.6% expected), suggesting the economy has lost more momentum. However, perversely, poor economic news in Japan is good for shares apparently on ideas that it boosts confidence that additional BOJ action will be needed.

Separately, Japan reported a JPY138 bln current account deficit in October. The seasonally adjusted balance also was a deficit (JPY59.3 bln). The weakness of the yen is boosting value of imports. Some preparation for the retail sales tax hike may also be lifting imports. However, the trade balance improved marginally. It was the deterioration of the investment income balance that appears mostly responsible for the larger-than-expected deficit.

Of note, the Nikkei gapped higher and saw follow through buying. The gap created by last Wednesday's sharply lower opening (15579-15662) was entered and nearly filled, with the Nikkei closing on its highs just above 15650. The near term price action is very important from a technical point of view. Turning back down after not completing that gap would reinforce concern of a top ahead of the doubling of the capital gain tax. On the other hand, follow through gains will encourage a test on the 5-year high set in May near 15942.

The second equity highlight in Asia were Indian shares, which gained a little more than 1.5%. The local markets responded positively to the electoral success of the main opposition party, the BJP. National elections will be held in May and the BJP now seen with the necessary momentum to push out the Congress party that governed for a decade. The rupee is the second strongest Asian currency today behind the Malaysian ringgit, gaining about 0.65% against the dollar.

European news has been fairly light. Switzerland reported a 1.2% increase in October on top of the 1.0% rise in September. Neither this nor last week's positive CPI reading will be sufficient to get the SNB to do anything at this week's meeting. The floor for the euro/franc exchange rate remains in place at 1.20, though the euro has not been below CHF1.22 since April. In fact, the approach of this area before the weekend brought in some technical buying today.

The German trade and current account surpluses slipped marginally in October. As a percentage of GDP, Germany's external surplus is still the largest in the world. This, even with China's largest trade surplus in 4-years happening over the weekend. Consider that China's economy is twice the size of Germany's. China's trade surplus for January-November stands at $234 bln. The German trade surplus for January-October stands at 165 bln euros. (~$226 bln).

Separately, German industrial production came in considerably worse than expected at -1.2%. It is the third decline over the past four months. Recall that before the weekend, German reported that October orders had fallen 2.2%, more than twice the consensus. The manufacturing PMI has been trending higher since especially since turning back above the 50 boom/bust level in July. In October, it had risen to 51.7 from 51.1.

The economic calendar is light for North America today. Canada reports November housing starts, but is not likely a market mover. Canada reported disappointing jobs data before the weekend. The headline rise of 21.6k jobs was overwhelmingly a function of an increase in part-time positions. The US dollar tested the CAD1.07 area before backing off. There seems to be a consensus emerging for the Canadian dollar to underperform next year. Many are now talking about a move toward CAD1.15-CAD1.17 in 2014.

In the US, news that household wealth is at record highs will likely grab the headlines. However, as we know, that wealth has become more concentrated, not less. Three Fed presidents (Lacker, Bullard and Fisher) speak before the radio silence ahead of next week's FOMC meeting. A Bloomberg poll conducted after the jobs data found that a full third of economists (double the November survey) expect a December tapering. We remain skeptical and suspect that at most a general plan to do so can be agreed upon, but not implemented until 2014. We lean toward March.

Lastly, we note that BOE Governor Carney is speaking in NY today around midday.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.

Source: U.S. Dollar Mixed To Start The Week