Monetary policy divergence back at play with risk-on return

With Equities recovering around the world, familiar themes are again back in play. Monetary policy divergence and risk off is looking to be most prominently dominating today's trade.

It has been showing signs of return from late New York session yesterday, which has now intensified heading into end of the week and after FED chair Janet Yellen's speech indicating optimism over US economy.

S&P sell offs were halted at 1900 support area and today future is now trading around 1950, more than 1% for the day so far.

Chinese market got sold off sharply today, however that failed to generate risk aversion and panic and finally closed at 1.6% for the day.

Japanese CPI similarly posed doubts over the strength of Japanese economy, as deflationary threat returned. However, that too has failed to spark any major risk aversion. Japan's Nikkei is up 3.2% already and still going strong.

With risk on theme clearly on the move, Euro and Yen remains out of favor.

Euro is currently trading at 1.113 against Dollar, down more than 165 pips from yesterday's high and Yen is currently trading at 120.9, down more than 170 pips against Dollar.