European stocks edge lower
While risk markets should get a fillip from the US stimulus plan, growth is ultimately needed to sustain any recovery, and here concerns remain.
"The Federal Reserve's decision to engage in an open-ended purchase programme reinforces the carry trade in the US dollar and risk assets. It is unlikely to produce meaningful change in economic growth, in our view," Jefferies analysts said in a note.
The single currency eased in early European trade but traded flat against the dollar after weaker than expected US data.
"We are due some consolidation. We could trade below $1.30 again but will see $1.35 by year-end. It's a combination of improvements in Europe and deteriorating dollar sentiment," said Daragh Maher, currency strategist at HSBC. The greenback is expected to remain under pressure in the coming weeks as the effects of the US stimulus plan work their way through the system.
It remained near a seven-month low against a basket of key currencies on Monday and extended losses versus the yen after the Empire State new orders index hit its lowest since November 2010.
The dollar's drop in recent weeks has been contrasted by the euro which has been the strongest performing major global currency. It is a rise which has been supported by the ECB's plan to help lower the borrowing costs of indebted euro zone countries, if and when the countries concerned - chiefly Spain - ask for that help.
ECB member Luc Coene and France's finance minister Pierre Moscovici are both due to speak in London starting at 4pm Irish time and could provide fresh information following policymaker meetings in Cyprus over the weekend.
The reversal of Friday's trend in currencies and stocks also fed through into the bond market, with German Bunds, up 16 ticks.
"A lot of good news is priced in and now the market is pondering whether or when Spain might require a bailout," said Rabobank rate strategist Richard McGuire. "The realisation is dawning it might not be rushing."
Reflecting the uncertainty, Spanish 10-year bond yields rose back toward 6 per cent today. Spain's prime minister Mariano Rajoy has said he would not accept a rescue that dictated spending cuts.
"The market has priced in an actual bailout and the longer Spain prevaricates, the greater the risk the market will strong-arm them into accepting a support package," Mr McGuire said.