Despite general support across high yielding currencies, the Euro remained out of favor overnight with the assistance of ratings agency Egan Jones which downgraded Germany from AA- to A+. Investors are also transfixed on the EU Summit at the end of the week and the Euro's reluctance to grind higher suggests expectations are low. Should markets keep the status quo ahead of the event, it may present upside value for the Euro if European leaders - at the very least - produce any solid growth initiatives. Last week's commitment of traders report showed a considerable weight on the short side for the Euro which may see reluctant squaring of positioning surrounding the event, but thus far we've seen little signs of this. For now we've seen a divergence from the Euro against its risk counterparts with the EUR/AUD pair maintaining a downward trajectory overnight. Support for the Euro kicked in around the $US1.2440 level but remained under pressure below $US1.25-figure.

The cost of Spanish government debt remained a negative focus across markets overnight with an auction of 3-month bills demanding a yield of 2.362 percent, a considerable difference to 0.846 percent last month. It's evident Spain's ability to raise cash in the traditional form is becoming unsustainable with the nation essentially being shut out of the debt markets. Although Spain has formerly sought financial assistance to recapitalize its stressed banking system, the risk of a sovereign bailout is growing, placing European leaders under further pressure to come up with a palatable blueprint at this week's summit.

After sliding on Tuesday, U.S stocks staged a modest comeback overnight but the general lack of optimism surrounding the EU summit later this week kept gains in check. The DOW and S&P closed 0.26 and 0.48 percent higher respectively. Economic data from the U.S showed the S&P/Case Shiller Housing Index rose modestly in April while U.S consumer confidence fell to an index level of 62 in June against an expected print of 63.

The Australian dollar recorded modest gains overnight supported by U.S equities which also managed squeeze out a moderate rise.  Despite further pressure on the Euro, support was maintained for the Aussie dollar above U.S dollar parity, but any meaningful breakout was capped around the 100.8 US cent region which previously acted a resistance for the local unit. In the absence of local economic feedback, we anticipate these technical levels will remain key barriers in domestic trade.