One of the pitfalls of forex blogging (or all financial reporting for that matter) is that it’s inherently after-the fact. In other words, any information about the past – while relevant – is inherently useless, since it has theoretically already been priced into the asset (or currency in this case). Before I begin my post on the Pound’s recent decline and the factors that wrought it, then, I wanted to offer the caveat that in analyzing past events, we must simultaneously look to the future.

The market has been grasping at straws with little data to use as fodder, especially in the North American trading sessions. Risk-on, risk-off has been moving on hearsay. China may decouple the Yuan from the dollar, the Greek’s have Obama’s support and equity markets rallying on ‘air’ with little volume. Opposing arguments against a stronger EUR are mounting. Rating agencies are questioning the possibility of a European sovereign default.

Setups abound.  (The Reformed Broker)

Is the risk trade back on again?  (The Money Game)

German Chancellor Angela Merkel and Luxembourg Prime Minister Jean-Claude Juncker called for urgent regulation of credit-default swaps to shore up the euro area and prevent a rerun of the Greek financial crisis.

Merkel, speaking to reporters in Luxembourg today before Greek Prime Minister George Papandreou meets President Barack Obama in Washington, said the European Union must take the lead in curbing the “very speculative elements” of derivatives trading, going beyond previous Group of 20 nations agreements. The U.S. must also be on board, she said.

The market continues to grind higher. The prevailing thought on "the street" is that the credit crisis is overblown. Traders are focusing on solid earnings, strong balance sheets and low interest rates. Economic conditions are not recovering at the pace everyone would like to see, but the consensus is that better times lie ahead. The SPY is within striking distance of a new high for the year. Earnings season is almost over and the economic news is light. That means that the upward momentum will continue and it could be fueled by option expiration.