The NY session started with the dollar lower across the board on increased risk appetite from upwards of+2% gains across Europe equities. Stocks in Europe gained the most in five weeks on speculation the decline in shares overran the outlook for company earnings. Optimistic RBA communication along with a robust trade surplus helped ignite the fuel for the risk rally that continued into the early US hours. Pre-open US equity price action saw EURUSD testing into 1.2600 and AUDUSD testing .8500 with stock index futures trading higher by +1%. The only data out of the morning session was US June ISM Non Manufacturing which printed an actual 53.8 versus expected 55 and a prior 55.4. The worse than expected data did little to suppress the rally as shortly after, EURUSD broke above 1.2600 towards a high around 1.2660 and AUDUSD pressed up near the .8550 level.

Bond markets did not confirm this euphoria as yields diverged lower even with the apparent improvement in risk appetite. It seems the move may have been stop-loss driven as equities eventually began to drift lower to trade in the red. EURUSD and AUDUSD followed suit as they traded down towards 1.2600 and 85.00 respectively. Equities were able to muster a late rally in the last hour of trading with the S&P ending +0.54% at 1028 and the DJIA +0.59% at 9743. Regardless of the positive close, the equity markets inability to sustain strength along with lower US yields sent a message of uncertainty for the immediate direction of risk assets.

Data out of Asia Pacific is relatively light with June AiG Performance of Construction Index out of Australia and June Official Reserve Assets out of Tokyo. UK BRC June Shop Index will be released during afternoon Tokyo trading. It seems the next major events for the markets will be Thursday’s BOE and ECB meeting, though no change in policies are expected.