Talking Points:

• Yen drops, commodity Dollars rally amid broad risk appetite recovery
• S&P 500 futures rise, hinting risk-on mood to continue in the near term
• US Dollar may not see lasting follow-through on Services PMI survey

The anti-risk Japanese Yen underperformed while the sentiment-linked Australian, Canadian and New Zealand Dollar rallied in overnight trade as Asian stocks recovered after yesterday’s decline. Regional shares added close to 1 percent on average after the MSCI Asia Pacific benchmark gauge fell 0.8 percent – the most in two weeks – in yesterday’s session.

S&P 500 futures are pointing decidedly higher ahead of the opening bell on Wall Street, hinting the risk-on mood is set to continue in the hours ahead. This suggests overnight momentum has scope to continue in the hours ahead.

A quiet economic calendar in European trading hours is likely to give way to resuming speculation about the path of Fed monetary policy as the final round of September’s flash Markit Services PMI survey is released. The pace of sector activity growth is seen accelerating for the first time in three months.

US data flow has struggled relative to consensus forecasts since late July but that hasn’t prevented the central bank from asserting that the case for tightening strengthened. This hints that US Dollar selling in the event of another downside surprise may struggle to find lasting follow-through.

Traders’ reservations about committing to a firm directional bias ahead of higher-profile event risk may likewise undermine continuity for a PMI-triggered move. Comments from Chair Yellen as well as four regional branch Presidents (Bullard, Evans, Mester and George) are due on Wednesday.

Asia Session

European Session

Critical Levels