One year has passed since Lehman Brothers folded, and the global economy has begun to recover. The decision by policy makers to met-out discretionary punishment to some financial firms and not others transformed a financial crisis into a global run on the bank, raising the cost of stabilizing both the global financial system and the global economy.

Forecasts for economic growth during the second half of this year and 2010 have been steadily ratcheted up as most of the monthly economic indicators have come in better than expected. We have raised our own estimate modestly

Euroland: Arguments for ECB to Hike in 2010

• The focus of the ECB now appears to be shifting from whether to implement more stimulus measures to when to begin withdrawing them.

Upbeat economic data dominated in August especially in the United States where the improvement in housing statistics and auto sales stole the headlines. Globally, talk of the end of the recessions in Germany,

Measured from the collapse of Lehman Brothers, the global financial crisis will have its one year anniversary this month. Lehman went into its final death spiral last September, imploding as the Fed and Treasury decided to use the demise of the relatively small investment bank as a lesson to Wall Street about moral hazard.

If there was any doubt to the dollar’s primary fundamental driver, the currency would forge a new 14 year low on a trade weighted basis and against its European counterpart while the Dow officially climbed above the 10,000-mark. Investor sentiment is keeping the greenback held down while a current of optimism sweeps the markets higher.

COT data is yet another piece of the puzzle that warns of a USD low.  EUR, AUD, NZD, CAD, and CHF long positions are at their highest levels in year(s).  Previous instances of one sided positioning led to reversals.

The following is our monthly correlations update for October.  As we have stated time and again, correlations between different currency pairs will inevitably shift over time.