Today's session, and the start the week, begins with risk-off trading as the dollar and yen gain on their higher-yielding rivals. While the developments in Europe - the change in leadership in Greece and Italy - were heralded as a positive sign, we still see tentative behavior by traders and investors as the euro zone still faces a grim financial and economic backdrop.

The EUR/USD fell from high to begin the week near 1.3780 to 1.3660 prior to the New York open. The GBP/USD also slid quite sharply down from near 1.6060 to 1.5935.

In Italy, as we have the steps being taken to formulate a new government headed by area Monti - choosing cabinet members and finding a political coalition - really undertook an auction of €3 billion of five-year notes.

From Financial Times: Italy has paid a yield of 6.29 per cent on €3bn worth of five-year bonds this morning, in the first auction held since Mario Monti was asked to head an emergency government. According to Bloomberg, the yield was the highest since June 1997 and up from 5.32 per cent at the last auction on October 13 - although at least it was down from last week, when yields rose above 7 per cent.

Despite the auction being fully subscribed, Spanish and Italian 10-year yields rose, which was a major factor in why we see European equities declining today session.

Italy's 10-Year Yield:

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Italy's 10 year yields, which started below 6.4% climbed above 6.5% in pre-New York trading.

Spain's 10-Year Yield:

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In Spain meanwhile we saw its 10 year yield rise from 5.85 up to 5.95, a jump of 10 basis points.

the development of periphery yields - especially from the third and fourth largest countries in the euro zone - will be the main driver of the euro in this weeks trading. Question is whether banks will continue to dump Italian bonds as they try to cut their exposure to the region's debt woes. By getting rid of their holdings of Italian bonds banks would therefore be moving out of the epicenter of the current crisis. This of course presents a problem for central bank policymakers and politicians who are trying to keep yields down.

Euro-zone Industrial Production Soft, Harbinger of Weak Growth in 4th Quarter

European equities which had begun the session in positive territory sold off as European trading progressed. Fundamental data showed industrial production in the euro-zone was down 2% in the month of September, and grew by the smaller than expected 2.2% in annual terms. That shows that the real economy is being negatively affected by the recent iteration of the sovereign debt crisis. With factory orders in places like Germany falling in October, it foreshadows soft production the rest of the year and the chance that the euro zone economy slips into recession.

We get data on the third-quarter GDP from Germany, France, and the wider euro zone this week.

- Nick Nasad is the Chief Market Analyst at FXTimes - provider of Forex News, Analysis, Education, Videos, Charts, and other trading resources.