The odds for a half point rate cut are less than 25 percent because the non-farm payrolls figure was not bad enough to warrant a larger rate cut.

The release of UK CPI on December 18, which is anticipated to show that consumer price growth accelerated faster than the Bank of England’s 2.0 percent target, could prevent the central bank from cutting rates in January.

Professional system trader Art Collins shares his daily biases in the index, bonds and currency futures markets for December 7.

Treasuries, the US dollar, and the Dow will respond more sharply to a surprising NFP read, as the unemployment rate will likely take a backseat to the headline news. And the most severe reactions in the market will likely be if NFPs fall negative, as this will nearly assure traders that the Federal Reserve will indeed cut rates next week.

The fall in the value of subprime-linked securities has boosted a group of funds which spotted the problems in advance. The decision to use derivatives to short, or bet against, low-quality U.S. home loans taken by a select group of hedge funds last year appears to have become the most profitable single trade of all time.

According to the ADP employment report, US companies added 189k jobs in the month of November, which was three times greater than the market’s forecast. This number is fishy but is so strong that it cannot be dismissed.

The global credit crunch that has rocked the markets since August has led European and UK interbank lending rates (Libor) to jump to multi-year highs while equity markets remain especially jittery and prone to declines. This has left both the BOE and ECB uneasy, as the instability of the markets adds to mounting downside risks to growth.

Todd Gordon describes the similarities in the recent dollar/yen and Dow trends.

Isn’t it wonderful how government can make things better by decree? By edict! By passing a law! Spend too much money? Running a little short? Don’t worry about it; we’ll print up some more. Who says government can’t be a positive force?