The greenback index played on the defense while Gold bouncedoff recent lows on Tuesday as the sell-off in the 10- and 30-year Treasuries startedto ease:

From the chart above it can be seen that longer-maturity bond yields started to recede on Tuesday. This apparently has brought welcomed relief to risk assets, which were under pressure due to stocks-to-bond rotation as well as risk aversion fueled by heightened volatility of base borrowing costs.

The rise in oil prices also began to lose its former strength, as concerns about disruptions in Saudi Arabia's production due to attacks on oil facilities receded. The prices are also supported by decline in US currency, since they are nominated in Dollars.

A 10% correction in the Nasdaq from February highs is showing signs of completion. The drop was primarily caused by rotation from the shares of the sector into cyclical stocks and Treasury bonds. The index futures have rebounded strongly today, possibly indicating a shift sentiment regarding the end of correction. S&P 500, Dow and Russell 2000 futures, key benchmarks of the US stock market, have posted decent gains as well on Tuesday. A similar level of optimism can be seen in European markets, with the exception of the German DAX, which lacks buying momentum due to poor economic data. A report on Tuesday showed that industrial output in Germany fell 2.5% in January compared to the same period last year, thus delaying hopes of quick recovery. Imports declined by 4.7%, however exports advanced 1.4%, indicating imbalance between recovery of industrial output and domestic consumption.

Monday report of the ECB regarding the weekly volume of asset purchases from bond markets under the PEPP program did not live up to market demands. The volume of purchases was less than expected, diverging from the ECB's recent commentary that the central bank is ready to use flexibility of the program to counter excessive growth in yields. Weak purchases indicate that the Central Bank of the Eurozone is in no hurry to curb the trend in bond market, which had a moderately positive effect on the European currency, as expectations on the Central Bank intervention did not materialize. Investors are looking forward to receiving more information on the ECB's views on the recent gains in nominal market interest rates at its meeting on Thursday.

If the ECB, like the Fed, makes it clear that it is not going to contain the rise in yields, since they reflect recovery of the Eurozone economy, the European currency will most likely strengthen against its opponents, since it’s valuation currently prices in the risks of a dovish ECB move.

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