Although we have yet to complete one full session of trade in the week, market sentiment seems to have improved substantially, with currencies, commodities and equities finding fresh bids and attempting to establish some form of a short-term base. A solid round of Club Med auctions and some encouraging data out of China and Australia have all helped to drive the latest resurgence in risk appetite. Nevertheless, market participants still need to proceed with caution as many risks still threaten the global economy and could just as easily force a resumption of flight to safety buying. Much weaker retail sales out of the US on Friday leaves room for concern, while a Bloomberg article warning of the potential for a second funding squeeze over the sovereign meltdown also weighs.

Joel Kruger, Currency Strategist, Daily FX