The relationship between the US dollar and risk appetite fell back into the familiar routine of things as fears over the state of the global recovery were the primary concerns of traders (other than those of Dutch, German, Spanish or Uruguayan descent of course)

Following a poor ISM survey from the manufacturing sector the US followed it up with an equally poor non-manufacturing release adding to the concern over the viability of the US’s recovery. With the employment measure slipping below 50, denoting contraction, these concerns are indeed warranted.

Earlier in the day however the markets had been happy to push risky assets higher on news out of Spain. Spain sold around EUR6bn of 10-year bonds. The bid to cover was better at over 2x but yield levels were high. This was a key test of its ability to raise longer-dated debt in a wary market. The issue comes before a heavy period of focus on Spanish debt at the end of this month during which we will see investors redeeming EUR16.2bn of government debt. This is all after 3 months of disquiet over the state of all European debt; an issue which has, and will continue to, weighed on the euro.

The mood has dampened somewhat in the markets over the past couple of weeks as traders and speculators try to weigh up the probability of a double-dip recession in major economies over the coming months. This will continue until the data once again starts to move higher; something that with austerity measures being enacted around the globe and a possible slowdown in China, could be a long way off.

The data calendar serves up its first juicy bit of economic news this morning with the publication of EU GDP at 10.00. It is expected to come out at 0.2% led in part by government spending and exports. With the euro sitting where it is at the moment against the USD and GBP we would expect a slight moderation of single currency strength today. This is before the calendar hots up with the Bank of England and ECB and UK trade balance to come later in the week.