Three new figures to determine and guide US economic policy, none free of controversy:

• William Donaldson, as Chairman of the SEC, is bringing with him skeletons from the past. The eponymous bank he founded, now owned by CSFB, pioneered the notorious system of paying bonuses to stock analysts who helped bring in investment banking business. In addition, the health insurance company, Aetna, of which he was Chairman, has accusations against it of hiding information on losses. Those who have to approve his appointment may realise that only a spotless record is acceptable for the person meant to "clean up corporate America", and reject him.
• Stephen Friedman, as Chief Economic Adviser to the White House, has historically supported greater discipline in the Federal budgeting process and opposed deficits. He is a curious choice when it is mooted that Bush's next attempt to boost the US economy will be to announce still further tax cuts. In fact, for those of us who believe that the internal US deficit is part of the problem, Friedman might be a restraining force upon continued irresponsibility. Long may he withstand the attacks to which he will surely be subjected.
• John Snow, as Secretary to the Treasury, is accused by many of being too much of a clone of the clown (Paul O'Neill), with the interests of corporate America to the fore, and with even less concern about international competitiveness of US industry (actually, even less concern has to be impossible!). Snow is both the greatest enigma of the three, and potentially the most important. Could he either be in favour of a weaker dollar, or have been persuaded to espouse the cause of a weaker dollar, in order to pull the US economy out of trouble via exports, at the same time killing the risk of deflation?

We see the appointment of Friedman and Snow as positive steps towards the long awaited rebalancing of the US economy, addressing respectively the internal and the external deficits. There are other small signs of the end of winter, besides these first "Snowdrops", not necessarily brought about by change of policy, but by the inexorable forces of the market. Retail and wholesale trade is not following through on the November burst, and consumer credit growth has greatly slowed, even declining for non-revolving debt. It took years for the US imbalances to build up, and it will take years to correct them, but let us be optimistic that the first, tentative steps are being taken.

If the USA is indeed adopting a policy of seeking growth through exports helped by a weaker currency, they are not alone. Japan wants to follow exactly the same route. It seems a singularly foolish idea for Japan to want to weaken its currency in the face of a large trade surplus and totally stagnant domestic demand, but then it has been many years since any economic sense has come out of Japan.

Likewise, Germany is scarcely the source of much economic wisdom. The Government is showing about as much sense as a rabbit caught in the headlights, and certainly no greater initiative! The economic situation in the euro zone is not that bad in most countries (just a tendency to overheating in the South and West), but the whole continent is held back by the frozen and unreformed Germany.

The UK looks better than the euro zone, but is very vulnerable to US-style imbalances, like excessive house prices and consumer spending, and an over-valued currency combined with an industrial decline. The latest, record trade deficit brings home the point.

It is difficult to paint an optimistic outlook for the world economy (and that is true even without considering Iraq). Indeed, the best we can do is hope that the US Administration has at last started thinking about reversing out of the cul de sac down which it has been driving for so long.

Recommended average maturity for bonds in each currency.

No change in the average of five years across the board.

The Japanese Government have made themselves very clear. They are aiming at a lower JPY and pushing the BoJ to increase drastically their monthly buying of JGB's. In addition, they do not want the BoJ to sterilise future intervention; they want the extra liquidity left in the market. In the USA, the big overhaul in the Treasury Department, with John Snow the new Secretary, raises the question of whether the USA will opt for a change to its "strong dollar" policy. Major orders in thin markets, together with developments over Iraq, will be the main influences on foreign exchange over the next two or three weeks. Watch out for the big breaking points: USD/CHF 1.4350, EUR/USD 1.0300, and USD/JPY 126.00.

EUR/USD: A trading range of 0.9800 to 1.0200 is the most likely outcome. A clear break on either side would open the door for the next 100 to 150 points.

USD/CHF: Same comment: the trading range is also widening here, with 1.45 to 1.50 the most likely outcome. A clear break on either side would provoke the next move of 150 points.

USD/JPY: As said, we still believe in medium-term JPY weakness. The major support zone is around 120.-, having moved up to around 122.50. The next upside resistance is 123.80, 124.50 and125.50, and the big breaking point 126.00.

EUR/JPY: Same comment: the major support zone of 120.50 seems to be holding and has even moved up to the 122.-area. Upside resistance is at 125.50, 126.20 and 127.50. Here also we believe in further upside potential medium term, but suspect that extreme volatility will continue.

USD/CAD: Same comment: keep long CAD exposure established in the 1.5900 to 1.6000 zone. Set a stop profit at 1.5650, with next support coming in at 1.5530 and key at 1.5480. A break of the latter would set a new price objective of 1.5150. Upside resistance is at 1.5670 and 1.5730.

AUD/USD: Same comment: consolidation in a 0.5510/30 to 0.5650 range, with a "buy on dips" strategy of the Aussie below 0.5550. A loss of 0.5480 would send the Aussie immediately lower, with 0.5430 as the first objective.