Risk-sensitive assets remained out of favor overnight with investors flocking to all the usual safe haven haunts. Equity market from both side of the Atlantic slumped with France’s CAC leading the European charge lower with losses of 2.24 percent on the day, while U.S risk barometers the DOW and S&P500 fell 1.28 and 1.43 percent respectively. Negativity surround Spain’s banking crises alongside the usual Greek related concerns promoted the global bid for safety with risk currencies the primary casualties. Bankia, a major Spanish financial institution, has called on the government for a further hand-out to the tune of 19 billion euro’s as part of a total 23.5 billion euro capital injection. Government plans to recapitalize the troubled bank with government debt has reportedly been thwarted by the European Central Bank in yet another hurdle in Spain’s economic plight.

Naturally, this encouraged further downside from the Euro which recorded fresh 23-month lows of 1.2361 against the greenback and currently remains under pressure below the 1.24-handle. Borrowing costs from Europe’s most vulnerable nations continued to rise with Spanish 10yr yields moving ever closer to the 7 percent ‘bailout zone’ while a debt auction in Italy fell short of target.

The Aussie dollar took a hit in the ensuing period of yesterday’s retail sales data and the momentum continued overnight with price action moving to lows of 97 US cents a short while ago.  A global bid for safety saw a natural move to the perceived safety of the US dollar and Japanese Yen while demand for U.S debt pushed 10yr yields to a record low. Whether or not we see a consolidation at these levels remains to be seen, but it’s clear the global environment is not conducive to risk asset strength with high-beta currencies such as the Australian dollar finding little relief in current conditions. With local conditions also on the slide, further deprecation of the Aussie dollar will be welcomed with open arms by local manufacturers and retailers struggling to compete on the global stage. Yesterday’s less than inspiring retails numbers is a testament to these struggles with sales falling 0.2 percent in April.

Local data in focus today includes private sector credit, private capital expenditure and building approvals which are due for release at 11.30 AEST. Capital expenditure is expected to bounce back with a 4 percent rise in the first quarter after a previous contraction of 0.3 percent. We consider previous supportive behaviour around the 96.6/8 US cent region to contain losses in the local session should today’s data disappoint before we’re once again at the mercy of global markets to dictate movements on the local unit. The Australian dollar is currently buying 97.1 US cents, 76.77 Yen and 78.5 euro.

Currencies and equity markets told a decidedly different story overnight with strength from European and U.S stocks unable to provide sustained support across risk currencies. For every positive thematic in the market, there’s equal and opposite negativity holding back a sustained rally and although we’ve seen positive movements across European and U.S indices, risk currencies remain capped under the weight of Euro-region uncertainty.

The Australian dollar found intermittent periods of support overnight but selling pressure ahead of 99 US cents capped gains alongside the Euro with the EURUSD pair making a break to the downside of $US1.25-figure to fresh 23-month lows of $US1.2460.

Further weakness from the Euro coincided with a downgrade from ratings agency Egan-Jones which cut its rating for Spanish debt in Junk territory. Although a smaller firm then the three most watch ratings agencies, market participants considered it a pre-cursor to what we may see from the big three, S&P, Fitch and Moody’s.

European indices recorded strong gains with the CAD and DAX both rising over 1 percent, while the FTSE trailed behind with pressures from southern Europe the primary stumbling block. German consumer prices grew at an annual pace of 2.1 percent in May according to official data released overnight, falling short of economists estimates and the previous reading of 2.1 percent.

Optimism surrounding Greek polls which signalled pro-bailout parities are gaining support underpinned gains across the Atlantic with U.S equities finding form. The S&P500 and DOW which both recorded over 1 percent gains.

The highlight of the local day will be the release of retail sales data which is expected to see sales grow 0.2 percent in April down from 0.9 percent growth in March. Also on the docket is the construction work gauge – both are due for release at 11.30 AEST. At the time of writing the Australian dollar is buying 98.5 US cents.

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It’s been a solid start to the week across the risk spectrum driven by talk of a rescue fund for troubled Euro-region banks and encouraging opinion polls from Greece which suggest conservative parties will fare better at the next election. With U.S markets closed for Memorial Day, European markets set the trend but erased earlier gains by the close with key benchmark indices the CAC and DAX finishing 0.16 and 0.26 percent lower while the FTSE managed to squeeze out a 0.1 percent gain on the day.

The Australian dollar is leading the risk currency charge higher with strength across major counterparts, but with little fresh news to keep the momentum going, strength seen earlier in the session died out by the close. We’ve seen a series of stabalising factors assist in a notable rebound from risk currencies, but market participants remain unconvinced we’re seeing a material shift in sentiment given the major questions marks surrounding the future of the European Union. Given this recent theme of negativity, we’ve seen a significant build up in short positioning across risk assets with recent commitment of traders report suggesting AUD and EUR shorts positions have never been greater, while USD long positioning is the strongest seen since 2008. Importantly, a slight upside shift in sentiment can often promote a sharper reversal given the squeezing out of short positioning, albeit for a short period of time.

The Euro’s ascent has been moderate in comparison to its risk counterparts with the EURUSD pair running into resistance around the $US1.2620 after the local close with the pair – for the most part – maintaining a downward trajectory overnight. Supportive behavior is noted around the $US1.2520/30 region. Meanwhile, Spanish bond yields continue to rise as the nation prepares to rescue it’s largest financial institution Bankia. The premise of Spain recapitlising the troubled bank with sovereign paper is attracting negative attention which has detracted from the other more positive themes across markets. Local economic data today includes HIA New home Sales at 11am AEST.

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After another less than inspiring week across the risk spectrum, we’ve seen talk of a rescue fund for troubled Euro-region banks assist risk currencies to bounce back in early trade. Reports suggest the plan involves taking control of Europe’s struggling bank’s and importantly funding will be levied on the same banks the rescue funds will support – a crucial clause given German resistance to any further taxpayer funded initiatives. There’s also talk Italian Prime Minister Mario Monti will accompany this with a proposal to guarantee deposits to Euro-Zone banks in an effort to avert further wide-spread withdrawals across Europe’s vulnerable banking system. Nevertheless, the week ahead will almost certainly be driven by Eurocentric headlines with the Greece’s dilemma’s threatening to reach critical mass levels with each passing day. Alongside a number of mid-tier data points, the health of Europe’s largest economy will be in focus with German CPI and unemployment data on the docket with ECB President Mario Draghi also due to give a speech.

Across the Atlantic, the health of U.S employment will also be in focus with non-farm payrolls due on Friday but not before a series of jobs relative precursors throughout the week to guide expectations with weekly jobless claims, ADP private sector gauge and Challenger job cuts on the bill. The U.S economy is expected to have created 150,000 new jobs in May from a previous 115,000 with the official unemployment rate expected to remain at 8.1 percent. Also in focus this week will GDP and core consumer expenditure (Thursday) with ISM manufacturing gauge due on Friday. The key directive from a local perspective will be retail sales due for release on Wednesday with Private sector credit and AIG manufacturing data due on Thursday. Official Chinese manufacturing PMI along with the HSBC equivalent will be key to the local unit’s movements on Friday.

We’re seeing wide-spread support for risk currencies in early trade with Euro making a solid break to the upside of $US1.25 after forging fresh 23-month lows of $US1.2495 on Friday. The Euro is currently buying $US1.2565. This has also promoted strength across high beta currencies with the Aussie and Kiwi rallying in unison. At the time of writing the Australian dollar is buying 98.1 US cents.

‘All taste and no nourishment’ appears to be the general consensus after the Euro-leaders dinner meeting in Brussels which yielded little in the way specifics or conclusive way forward. Any sign of solidarity or a unified front from Euro leaders is proving to have a limited impact at a time when concise direction is required. The topic of Eurobonds remained in contention with French President Francois Hollande using the event as a platform to promote the need for jointly issued debt. Meanwhile, Italian Prime Minister Mario Monti has also thrown his support behind implementing Eurobonds suggesting they should be considered “when the time is right, but not in too long.” Nonetheless, nations with high borrowing costs in support of jointly issue bonds are likely find strong resistance from Germany who remains opposed to such measures.

Despite solid gains across European equity markets and mild support for stocks across the Atlantic, the overall theme of negativity continued to hold risk assets at bay overnight with intermittent periods of strength quickly overcome with European drama’s remaining the key directive. After falling to fresh 22-month lows the Euro regained some composure throughout the session, but any upside was quickly met with resistance with the pair stabilizing around current levels of $US1.2540. The Australian dollar followed a similar path but has overall outperformed its major counterparts and found moderate support against the greenback. After a brief stint below 97 US cents yesterday, the local unit rose to highs of 98.14 US cents overnight before tailing the Euro lower in the latter part of trade.

With little in the way of local economic directives, we anticipate regional equities to remain the primary driver throughout domestic trade with the AUDUSD pair likely to remain supported above the 97.1 US cent region. At the time of writing the Australian dollar is buying 97.65 US cents.

Risk currencies took a deeper leg lower overnight with Euro-region dramas remaining the key directive. European equities slid amid further ‘Grexit’ concerns with benchmark indices the FTSE, CAC and DAX all falling in excess of 2 percent on the day. The bid for safety found market participant’s flock to all the likely places with German debt yields falling to records lows in a testament to the sort fear and trepidation in the market place. Fears escalated Tuesday after former Greek PM Lucas Papademos revealed contingency plans are in place in the event of a Greek departure and this theme continued overnight with reports the European Central Bank are assessing the ramifications should Greece fail in its efforts to form government.

The US dollar remained on form with solid gains recorded against the out-of-favour Euro with price action making a break to the downside of the $1.26-handle. The Euro fell to lows near two-year lows of $US1.2545 before a slight reprieve but remains under pressure below $US1.26-figure. The Australian dollar followed a similar trajectory hitting fresh 6-month lows of 96.89 US cents before finding its feet above 97 US cents and is currently buying 97.5 US cents.

The day ahead will see the focus shift to China with the HSBC Manufacturing PMI due for release. This is clearly the type of environment that could induce further short-term pressure for risk currencies, with the Australian dollar eyeing the 96.6 US cent region should today’s data undershoot estimates. Meanwhile, market participants are eyeing any feedback from a meeting of Euro-zone leaders in Brussels were its expected they attempt to strike common ground on pro-growth strategies to bring troubled nations back from the brink.

After making significant headway throughout yesterdays domestic and in early European trade, the Australian dollar resumed its downward rout overnight with price action briefly crossing the downside of 98 US cents earlier this morning, representing fresh 6-month lows. Risk currencies in general remained defeated despite positive leads from European markets which saw the FTSE, DAX and CAC record solid gains. For European markets it remained a ‘no news is good news’ environment with moderate optimism ahead of the EU Summit Wednesday. European leaders including new French President Francois Hollande will attend an informal dinner with the primary agenda expected to be centered on ways to promote growth and employment in the region. It’s also expected to see Hollande put forth the importance of implementing a Euro-bond which will yield little result.

U.S stocks erased earlier gains with continued uncertainty across the Atlantic the primary catalyst. A solid existing home sales report provided some earlier upside momentum, however European fears dominated by the close with the DOW and S&P500 finishing largely flat on the day.

Meanwhile, consumer prices in the UK continued to moderate according to official inflation data released overnight with headline inflation slowing to an annual pace of 3 percent from a previous 3.5 percent while core inflation slowed to 2.1 percent from a previous 2.5 percent. Sterling outperformed risk counterparts overnight and saw on moderate losses against the greenback relative to the Euro and commodity units. After an early week reprieve, the Euro pared gains overnight with EURUSD price action moving to lows of $US1.2657 and currently remains under pressure below $US1.27-figure.

With a reasonably light day in terms of local economic data, we anticipate the key directive for the local unit will remain regional equity markets with the Conference Board Leading Index the only low-tier theme domestically. Japan will also be a primary focus with the Bank of Japan interest rate decision due today which has seen broad based Yen weakness in the lead up, with some corners of the market anticipating further easing measures.

European and U.S equity markets rebounded overnight with market participants finding solace in global leaders unwavering commitment to keep Greece in the Euro-zone.  Over the weekend the G8 leaders confirmed their support for a united Euro region, while opinion polls suggest the pro-bailout New Democracy Party is gaining support ahead of next month’s elections in Greece.

We’ve seen a succession of negative themes lead to a sustained period of weakness across the risk spectrum but moderate optimism began to feed through with investors also encouraged by Chinese Premier Wen Jiabao who over the weekend who indicated a need for stimulus in an effort to sustain strong growth in the region. After a series of largely uninspiring data points, there appears to be a significant shift in language from Premier Jiabao which indicates a gradual unwinding of policy initiatives designed to keep inflationary pressures under control.

While we may see a period of relative stability across global markets, it’s clear that without a solution to Greece’s political instability the balance of risk will continue to err on the side of caution. With plenty of dead air to fill between now and the next Greek elections on June 19, without intervention, it’s only a matter of time before markets take a deeper south-bound turn. Meanwhile, Speaking in Tokyo, Fed Atlanta President Dennis Lockhart expressed the need to keep policy easing measures such as quantitative easing in the Fed’s took kit, stating “QE3 will work under the right circumstances. But I don’t believe such circumstances prevail at this time.”

It was a relatively solid night across risk currencies with the Euro and commodity currencies rallying in unison. The Euro has managed to squeeze out gains with a break to the upside of $US1.28-figure while the Aussie rebounded to highs of 99.19 US cents. In essence, we’re seeing moderate optimism lead to a short squeeze across risk currencies with further upside momentum reliant on more positive news from the source, Europe.

The US dollar continued to thrive through the course of last week as heightened anxiety from the Euro region forced a global bid for safety. This cautious positioning remained the key theme on Friday at the expense of the Euro, Sterling and commodity bloc currencies with Spain and Greece once again the key elements. Equities from both sides of the Atlantic continued to fall under the weight of general anxiety from Europe with risk barometers the DOW and S&P500 falling 0.60 and 0.74 percent respectively. The perceived safety of U.S debt kept treasuries well-support throughout the week with 10yr yields finishing the week slightly higher after falling near to record lows on Thursday.

It’s been a succession of negative themes for commodity-contingent  currencies with the Aussie and CAD posting around 2 percent losses for the week, while the Kiwi took a deeper leg-down with the NZDUSD pair losing near 4 percent for the week. Along with a treasure-trove of ratings downgrades for Spanish banks, throw into the mix the potential for a Greece departure from the Euro-zone and further signs of slowing in China and you’ve got a recipe for deep losses across the risk spectrum.

Meanwhile, a higher than anticipated Canadian CPI read failed to provide the Canadian dollar a sustained boost on Friday the USDCAD pair continuing on a north-bound trajectory for the most part of north American trade. Canadian consumer prices rose 0.4 percent in April to represent annual growth of 2 percent. Core inflation also recorded 0.4 percent growth slightly higher than the 0.2 percent estimated to represent annual growth of 2.1 percent. Despite recent hawkish language from the Bank of Canada, Friday’s inflation data is not considered the smoking gun for the BoC with inflation remaining within target.

In the absence of any top-tier local economic data, the key focus for local pundits will remain focus on the events of abroad with Europe’s debt dramas front row and centre. Amid the constant conjecture over the health economic future of Greece and Spain, growth data from Europe’s largest economy will also be a key focus in the week ahead. German Gross Domestic Product is expected to show seasonally adjusted growth of 0.5 percent in the first quarter to represent annual growth of 1.2 percent. The German IFO data series will also be closely watched alongside Euro-Zone and German PMI which are also on Thursday’s docket. Across the Atlantic, the health of U.S housing will be under the microscope this week with Existing/New home sales and house price index on the bill. Durable goods orders are expected to rebounded in April after 4.2 percent decline March and the final revision for the University of Michigan consumer confidence gauge is expected to be unchanged at 77.8 in May.