Currency majors were once again debilitated by another session that was dominated by risk aversion. Early comments from Moody’s rating service that Spain’s sovereign debt rating of Aaa was in jeopardy was the first blow to risk, softer Chinese PMI data was the second. Chinese purchasing manager’s index data came in at 52.1, a bit off of the 53.2 forecast and last month’s 53.9 results. While the data was not terrible, it did forecast that the road ahead may be a bit bumpy for China and risk was taken out at the knees.

EUR/USD erased early 1.2240 highs to post lows just under the 1.2195 level, retracing a 24 hour move that saw highs of 1.2300. Against the Swiss Franc the Euro was decimated as the EUR/CHF spent another session making fresh all time lows near 1.3072. A reversal heading into London trade would add back almost 60 pips to that low.

Equities in Asia continued their five day slide, with the Nikkei down over 4% at points in the day, helping to keep the yen crosses weak in conjunction with the China data. EUR/JPY dipped to fresh 8 ½ year lows of 107.45, GBP/JPY found itself touching 131.40 lows on the session, and AUD/JPY lost almost 130 pips when it bottomed out at 72.30. USD/JPY slid from 88.55 to 88.10, but turned around to 88.40 levels as London awoke for the day.

After a plunge of over a big figure to 0.8315, the Australian dollar got a reprieve when it was announced that the government was close to a deal with mining companies over the 40% tax imposed by the former Prime Minister. The AUD/USD pair was firmer near 0.8350 as investors awaited further details of concessions between the two factions.

A big day lays ahead in the US with top tier data in the form of Unemployment claims, ISM data and pending home sales.