As we expected, the market shunned the negativity and returned to focus on the positive factors and underlying recovery across major economies. Equities in Europe recover from the biggest drop in a month on good earnings and currencies start to rise again on interest rate bets with the stream of positive growth figures easing jitters.

The market was still mixed and pessimistic in the morning, with heavy losses in Asian markets and for commodities on the S&P's move to downgrade the outlook on the US credit rating to negative. The market turned positive yet with the good earnings and as expected the good industry data from Europe, helping offset the losses.

The dollar returned south and surrendered some yesterday's gains as the dollar index trades bearishly now around 75.17 off highs at 75.60 and around lows at 75.13.

We can see the euro recovering from the losses and currently hovering near its highest recorded at 1.4316. The EURUSD is hovering around 1.4300 areas off lows at 1.4203 as the stronger than expected manufacturing PMI offset the drop in the services index which still remains in strong expansion, bolstering the appeal of the recovery status and the likelihood for the ECB to continue the tightening policy opposed to the lenient feds with subdued inflation so far in the US.

The return of risk and the good figures also boosted sterling which followed the euro and moved higher versus the dollar. Sterling mainly rose on the weak dollar as investors remain mixed for prospects for monetary tightening from the Bank of England ahead of the BoE minutes tomorrow that is expected to show the same prevailing three-way split among members.

The GBPUSD recovered with the improving sentiment from the lows of 1.6227 and rebounding from critical support areas supported by the positive momentum to currently trade around 1.6300 areas slightly below the highest recorded so far at 1.6314.

As for the Japanese yen, the currency returned to weaken with the easing jitters and rebounding equities which offset the demand on the haven Japanese currency. The pair rebounded off lows at 82.30 to trade now at 82.59 and marginally flat and slightly below the 82.69 highs recorded.

We have housing data on the queue from the US economy and the data is expected positive and strong and accordingly if that was confirmed the ongoing positivity in the market will extend for the day.