The wave like pattern in risk appetite is a testament to the lack of constant drivers and summer trading. Yesterday saw a recovery in risky assets and today risk sentiment is on the decline. Asian equity markets closed lower and European markets are red across the board. Commodity and commodity currencies are trending lower with crude prices slipping below $60bll (first time since may) and AUDUSD trading down to 0.7765. As stated yesterday we are carefully monitoring both the EURCHF and USDJPY since both are at levels that will make there respective officials very uncomfortable. In fact, comments by SNB's Roth yesterday suggest that the central bank is still steadfast to its FX intervention strategy and the subsequent spike in EURCHF implies traders are extremely jumpy. The BoE unexpectedly kept its asset purchase program unchanged opting instead to finish current allocation while monitoring economic and credit market indicators. We believe that at the next monetary policy meeting an increase in the QE program is very likely and is setting the stage for a sterling fall. The G8 program ended today with no real fireworks. Chinese representative State Councelor Dai Bingguo provided the only noteworthy comment saying we should have a better system for reserve currency issuance and regulation so that we can maintain relative stability of major reserve currencies. However these words were caution since it failed to mention the USD by name and failed to register a response in the markets. We expect the USD to continue to rally and with a light calendar and thin trading volumes will keep overall FX trading choppy.

G10 Advancers and Decliners vs USD

Global Indexes Current Level % Change
Nikkei 225 Index9,287.28- 0.04
Hang Seng Index17,706.44- 0.47
Shanghai Index3,113.93- 0.29
FTSE 100 Index4,136.78- 0.52
DAX Index4,611.62- 0.39
SMI Index5,279.84- 0.48
DJIA futures8,101.00- 0.40

World Markets Current Level % Change
Gold910.88- 0.16
Silver12.84- 0.23
VIX29.78- 4.85
Crude wti59.73- 1.12
USD Index80.33+ 0.54

Todays Calender Estimates Previous Country / GMT
Global: G8 meeting to be held in Italy (final day)------
Producer input prices, % m/m (y/y) Jun0.8, -12.30.4 ,-9.4GBP / 08.30
Producer core output prices, % m/m (y/y) Jun0.2 (1.1)0.2 (1.2)GBP / 08.30
Producer output prices, % m/m (y/y) Jun0.3 (-0.7)0.4 (-0.3)GBP / 08.30
Trade balance, $ bn May-30.0-29.2USD / 12.30
Import prices, % m/m (y/y) Jun2.2 ,-18.31.3,-17.6USD / 12.30
Non-petroleum import prices, % m/m (y/y) Jun--0.2 (-5.8)USD / 12.30
Michigan consumer sentiment Jul-P71.070.8USD / 13.55