The US drought and the geopolitical backdrop have given agricultural and crude oil prices a lift in recent weeks. In addition, the prospect of ECB intervention in peripheral Eurozone bond markets has underwritten risk appetite in recent weeks as well. However, heightened Fed easing expectations have surely been a factor as well – the NY Fed’s Primary Dealer Survey for August showed a 65% median probability that the Fed would ease within a year, up from 50% in their June survey. “To the extent that financial conditions are one of many inputs into the Fed thought process recent developments would tend to reduce the odds of Fed easing.” Though even if the Fed nonetheless still delivers QE3 the upside for asset markets appears to be constrained as some markets are more advanced than others but overall the picture in recent weeks is more consistent with markets already discounting a good deal of easing.” writes FX Strategist Richard Franulovich at Westpac.