After making another attempt to break U.S dollar parity, the Aussie dollar followed U.S equities lower in the latter hours of trade overnight alongside commodity counterparts the CAD and Kiwi. Heavy resistance at parity capped gains before taking a leg-down alongside U.S stocks with the S&P erasing earlier gains to finish 0.7 percent lower. News of Moody's downgrade of Spain and Cyprus also proved to be another hindrance on sentiment with the agency cutting Spain's debt rating from A3 to Baa3. The Euro managed to muster gains amid continued anxiety from the region with a break above resistance of $US1.2525 to highs of $US1.2610 before easing back below the figure in recent hours.

With Greece's elections on Sunday we're seeing a recalibration of positioning given the high level of uncertainty surrounding the result. In short, it's a sink or swim moment and those heavily short players will adapt more of a neutral stance ahead of such a critical event, in turn promoting a short squeeze. Also critical to the short-term Euro fortunes is an Italian bond auction on Thursday which remains a key point of contention across markets given the contagion risk from Spain. Both Italian and Spanish borrowing cost continue to reflect a decidedly nervous market atmosphere with 10-yr yields rising to 6.22 and 6.77 percent respectively. European equity markets were mixed on the day with the FTSE rising 0.18 percent while the CAC and DAX fell 0.55 and 0.14 percent.

Across the Atlantic, global uncertainty continued to hurt U.S retailers according to the latest trade report with sales falling 0.2 percent in May, against a previous downward revision of 0.2 percent. U.S producer prices recorded annual growth of 0.7 percent in May, falling short of the 1.2 percent growth expected, while the core prices rose were unchanged at 2.7 percent, slightly lower than the 2.8 percent estimated.

Although feedback from the Euro-region continues to dominate moves across currencies, U.S stimulus bets remains a primary theme amid attempts to neutralise positioning ahead of such critical event risk. In such an environment, we anticipate any strength from high-beta currencies as tentative with significant moves one way or the other only likely upon closure of some of the more pressing issues facing markets, namely Greece's forthcoming elections.

Economic feedback in focus locally includes Consumer Inflation Expectations at 11am with Japanese Industrial production data due at 2.30pm AEST. At the time of writing the Australian dollar is buying 99.5 US cents.