The U.S. dollar has continued to sell-off post-FOMC meeting against most of the major currencies. The euro traded above $1.14 for the first time in a month. Sterling moved above $1.59 to new highs for the year. The dollar has moved back toward the lows spurred by BOJ Kuroda's recent comments about the yen's effective exchange rate.

Bonds are rallying across the board. As we noted previously, the euro appears to have been decoupled from the bund again. Also, despite the rally, the premium being paid by the periphery is widening. Stock markets are under pressure.The Nikkei has now convincingly broken the uptrend line drawn off last October's lows set just prior to the BOJ surprises. European bourses are lower, with the Dow Jones Stoxx 600 off more than 1%, led by information technology and industrials.

Today we identify seven things that are shaping the investment climate.

1. Over-reaction to FOMC: The market never accepted the conclusion form the March FOMC dot plots that a majority saw two rate hikes as appropriate this year. At its best, the Fed funds futures had fully discounted one hike.The new dot plots moved in the market's direction, and then the market moved again on the FOMC's "dovishness". We continue to believe that the dot-plot is noisy and that the FOMC statement itself is more important.There the Fed upgraded its assessment of the economy and sounded more confident than the dot-plot that the it was correct that most of the headwinds were transitory. We continue to expect a rate hike this year.

2. Nearly all the other major central banks are easing.This generalization includes the ECB, the BOJ, the PBOC, New Zealand, Australia, and Sweden.Today Norway joined the mix.The central bank not only cut the deposit rate by 25 bp to 1.0%, but signaled the likelihood of another cut as soon as its next meeting in late-September. It also cut its growth forecasts. Many participants had scaled back their expectations after the stronger than expected capex figures were reported. The Norwegian krone is off 0.8% today in response. The euro is poised to challenge the high seen earlier this month near NOK8.87.

3. The New Zealand dollar is the the notable exception to the weak US dollar meme. It is also off by about 0.8% now near midday in London. It was off around 1.25% earlier as the market responded to the poor GDP figures. The economy grew by 0.2% in Q1. This is a third of what economists expected and brings the year-over-year rate to 2.6% from 3.5%. What it does is solidify expectations for another RBNZ rate cut after last week's move. 

4. The May UK retail sales report was a bit better than expected,though the downward revisions to the April series blunts the economic impact. Headline retail sales rose 0.2% in May. The consensus had anticipated a 0.1% decline. The April series was cut from 1.2% to 0.9%.The year-over-year rate was unchanged at 4.6%.The more hawkish MPC minutes and the gain in average weekly earnings has sterling benefiting not just from a soft US dollar environment, but also from participants bringing forward when the BOE lifts rates.The $1.5880 area corresponds to a 50% retracement of sterling's decline since last July.The 61.8% retracement is seen near $1.62. 

5. The Swiss National Bank left rates on hold and did not change its forward guidance. Yesterday, the euro had fallen to CHF1.04, its lowest level in two weeks. Greece is still a weight though the cross is more stable now. The dollar has been sold through CHF0.9200, bringing the May lows near CHF0.9070 into view. 

6. The US House of Representatives are set to (re-)vote on the Trade Promotion Authority bill today as a stand-alone measure.The idea is that the Trade Assistance bill will be considered separately later. Some Democrats in the House say that all the Democrats that voted for the TPA bill last week will do so again. That would suggest narrow passage is likely. However, this will shift the problem to the Senate. It is not clear that the separation of the TAA from the TPA will be acceptable.

7. It is nearly a foregone conclusion that today’s Eurogroup meeting will not provide closure for the Greek crisis. Merkel’s speech to the German parliament today showed no sign that the creditors are yielding. The EU Summit a week from now is the next real opportunity.This is important. Just as Greece’s Tsipras had removed his finance minister from negotiations in the hope that it created a less antagonistic atmosphere, so too now does Merkel appear to be taking control of the negotiations from her finance minister.   

Known for her caution, and moving at the last possible moment, as she did with Greece the in 2010-2011, Merkel may have waited too long this time as positions have harden, and trust has been further eroded. Ultimately national interests are involved. Germany is acting like a creditor and Greece is acting like a debtor. When the shoes were on different feet, Germany acted like a debtor and Greece a creditor. Each drapes their position in moralistic terms. We continue to believe that a Greek exit would be more costly for Europe and Greece than a compromise here. There is a trilemma playing out between, austerity, reform, and debt relief.