The hope for 2013 rests on recovery and innovation – just ask Bernanke. The path forward is going to be choppy with increased doubt about sustainability. The last week of data didn’t help, and one has to wonder if next week’s will be any better with flash PMIs and US housing sales. Over the weekend, North Korea fires three short-range missiles on Saturday – no explanation given or needed. Horse racing brings the Preakness with Oxbow beats Orb and ends another Triple Crown hope. BOE King says the recovery isn’t strong enough – remember we should listen to men leaving their posts as they are more inclined to speak the truth. The best hope came from the Fed Chairman Bernanke who continues to extols innovation as the base for economic growth.

Commentary on financial market developments in advance of the May 20, 2013 trading day.

On Friday, it was revealed that first quarter Mexican GDP grew at only 0.8% from the year before, significantly less than the 1.1% growth that had generally been anticipated. This comes on top of a bevy of negative United States macroeconomic reports, over the week, that have weighed down on Mexico (the US is the largest market for Mexican exports, and a primary driver of the overall Mexican economy) including the US jobless claims jump, the US housing starts disappointment, and declines in regional business activity indicators. All of this adds a generous splash of fuel to speculation that the Banco de Mexico will once again cut its benchmark interest rate, perhaps as early as its June 7th meeting. Six-month interest rate swaps are currently indicating market expectations of a 72% probability of a rate cut over the next six months, compared to a 56% probability of a cut priced in on Monday.

Over the past two years, Germany has become an ever-stronger behemoth standing over the European continent, pressing its agenda in every forum and winning its point most of the time. Right now, the rationalization of banking risk and several important steps toward a more fiscally-centralized system for the Eurozone are opposed by critical members of the German establishment and would be subject to a veto by the Bundestag.