As European finance ministers hold a conference call to discuss the Spanish bank aid deal, high beta currencies and risk-correlated assets have come under pressure. The €100 billion aid package was enough to stoke risk-appetite over the past few weeks, but that doesn't seem to be enough for keep sentiment elevated.
As the US Dollar is being sold-off with haste amid hope that the Federal Reserve is leaning more towards a third round of quantitative easing, the majors have rallied with relative ease the past day. Despite this, the Euro continues to lag high beta currencies and risk-correlated assets following a weak Spanish auction.
Risk-aversion is the tone across the board on Wednesday as US equity futures have declined, commodities have sold off, and the Japanese Yen is the top performer.
The Australian Dollar is the top performer on a quiet Tuesday thus far, in which price action has been skewed in favor of high beta currencies and risk-correlated assets. The Reserve Bank of Australia's Minutes from the July meeting proved to be more optimistic than market participants expected, prompting investors to pare back rate hike expectations.
The Japanese Yen and the US Dollar are the top performing majors to start the week, with high beta currencies and risk-correlated assets paring their gains from Friday in mostly quiet trading to start the week.
High beta currencies and risk-correlated assets were well-supported in the overnight, with the Australian Dollar and the Euro failing to break yesterday's lows against the US Dollar, as market participants largely overlooked the disappointing Chinese second quarter GDP print.
Australian labor market data was a major disappointment in the overnight, showing that nearly all of the jobs gained in May were wiped out in June (save 0.8K). Australia, as a proxy to China, has been putting out weaker than expected data once again, raising emerging market growth concerns.
Little market moving data in the overnight alongside few headlines out of Europe has paved the way for a positive risk landscape thus far on Wednesday.
Poor Chinese trade data that showed the continued collapse of the Chinese consumer (plummeting price pressures alongside weaker Import figures) initially weighed on risk-appetite, but any trace of losses rooted in Asian growth concerns has been swept away as European funds have hit the market.
The carry trade continued to unwind on Monday as the Australian and New Zealand Dollars continued to shed ground against the safe havens, the Japanese Yen and the US Dollar.