Markets recover on Tuesday after difficult start to the week

The markets moved back into risk
off mode on Monday, as investors start to weigh up the pros and
cons of tighter monetary policy in the US, this saw 5.30% wiped off
the Shanghai Composite Stock Index in Asian trade, the FTSE 100 hit
a 5 ½ month low and Gold, Cooper and Oil also took a hit. As the
markets are over reliant on fast and easy money it is not unusual
for a kneejerk reaction to occur when the taps are turned
off.  This negative sentiment hit Chinese stocks for a second
day this week as the Shanghai composite lost another 0.2%(from a
low of 6%) as global fears of a fall in growth alongside an
apparent credit crisis from China start to become very real. 
As China’s demand for raw materials continues to falter, it is
likely commodity currencies, such as AUD and ZAR, will continue to
take the hit.  European trade has however recovered this
morning after rather dovish tones were noted from various FOMC
members yesterday and PBOC talk of action over recent tightening of
interbank lending, which has seen EUR/USD recover over 1.31, GBPEUR
has continued to chip higher above 1.1750 and GBP/USD has breached
1.5450 this morning also.

USD – On Monday, FOMC Member,
Richard Fisher expressed his concerns for an”exit” from the current
monetary stimulus and highlighted the Fed still has an
accommodative policy stance and will not act until the situation
calls for it. This is a more positive sign considering he is a
large opponent to the QE debate. Today, we have Durable Goods
Orders expected to take a tumble to -0.1% from strong growth of
1.5% last year, this is before New Home Sales are expected to hit
462k versus 454k.  More positive readings will likely be USD
positive before, the all-important; unemployment figures on
Thursday are expected to fall again.

GBP -A quiet session data wise for
the UK BBA Mortgage Approvals expected to rise versus April and CBI
Distributive Trades Survey to show a more positive turn. Today, we
have Mervyn King testifying for the last time as governor about the
economic situation in the UK before eyes turning to tomorrows
spending review, for 2015/2016 Tax year, to see which government
departments will need to cut-costs as the Chancellor continues his
attempt to bring government and UK finances back in line.

EUR – The Euro has had a volatile
start to the week from relatively little data but on the back of
risk-off market conditions. Monday saw German IFO Business Climate
Index pass without much fuss as it came in line with expectations.
Also on Monday Spanish Minister, Luis de Guindos, stated the nation
will not rush into a quick sale of two nationalised banks as
markets would not be giving fair value for a quick sale. Today,
there are no notable releases but it will be interesting to see if
Italian and Spanish bond yields follow recent trends of increasing.
That is before ECB President Mario Draghi will be speaking in
Berlin today.