NEW YORK ( BBH FX Strategy) -- The dollar moved broadly higher, paring back some of its recent losses after the recent risk rally ran out of steam ahead of key technical levels. Asian stocks follow the trend put in place on the Wall Street, rising for a sixth day amid hopes that European leaders are inching closer toward a plan to tame the sovereign debt crisis, while shrugging off Chinese data that showed a modest pullback in China's export growth.The MSCI Asia Pacific Index surged 1.2%, but gains were unable to be sustained in the European session and stocks fell back from a two-month high. Nevertheless, the pullback in the VIX to 30 from levels near 50 in August underpins the improved tone. Just-released better-than-expected bank earnings are boosting S&P futures ahead of the open. Oil prices down nearly 2.0%.
Elsewhere, China's exports rose 17.1% in September compared to the same month last year. That is moderation from the 24.5% year-over-year pace in August and the slowest growth rate since the 2.4% year-over-year clip in February of this year. In Latin America, after Mexico's dismal August industrial production, we believe it is likely that Mexico could cut rates. We believe it is not a done deal but the OIS market places a greater than 80% chance that the policy rate drops by 25 basis points to 4.25%, in spite of the fact that inflation remains close to the 3% target. The main driver, on balance, appears to be the slowdown in the global economy, U.S. in particular, with Mexico's exports to the US accounting for nearly 73% of its total.