The dramatic intraday rally in the US equities has helped many currency pairs recover their earlier losses. After having sold off to a 7 week low against the US dollar, the Euro managed to end the US trading session in positive territory. The prospect of interest rates remaining unchanged on Thursday is helping the EUR/USD outperform its peers. Other currency pairs were not lucky enough to turn positive like the Euro, but they are still well off their lows. The rebound may suggest that risk appetite is improving, but given that risk appetite can change as quickly as teenage trends these days, it remains to be seen whether the recovery will last. More layoffs have been announced adding to more significant job losses in the first few months of the year. Macy’s announced that they will be reducing their workforce by 7,000 employees and unfortunately there is talk that Morgan Stanley and Goldman Sachs are considering a second round of layoffs. Non-farm payrolls are due for release on Friday and announcements such as these could lead to a resumption of risk aversion ahead of the report.

According to the ISM report, activity in the manufacturing sector has contracted for the 13th consecutive month but the contraction is slowing. After hitting a 26 year low in the month of December, the manufacturing sector ISM index rebounded in January from 32.9 to 35.6.