Following on from weakness in Asian trade, the risk-off market atmosphere remained in-play overnight with market participants concerned Greece may not meet their fiscal targets in order to receive the next bailout installment. Despite a late come back from US equities, the US dollar remains broadly higher against major counterparts, which promoted losses across commodities, metals and energies. News this morning of rating agency Standard & Poor's downgrade of Italy has exacerbated losses across risk currencies with the US dollar extending gains.

The Euro has resumed its downward trajectory in the last 24-hours to make a break to the downside of $US1.36, but had pared some gains before Italy's downgrade and currently remains vulnerable around the $US1.3610 levels. The Japanese Yen was is also a beneficiary of a bid for safety remain near 10-yr lows against the Euro and the GBPJPY pair threatening to break the all-time low of 118.91 set in January 2009.

The Aussie dollar added to losses seen in domestic trade with price action moving to new 1-month lows of 101.6 US cents only moments ago coinciding with Italy's downgrade.  The key directive for the Aussie dollar today will be the release of RBA minutes for the September meeting.  Looking back on the ensuing statement, it appears we have reactive central bank with global economic concerns and local inflation risks rating equal importance. On inflation the statement pointed out the board remains concerned about the underlying measure of inflation, but also questioned if softer economic growth both locally and abroad will act to contain inflationary pressures. According to Governor Glenn Stevens, Prices for key Australian commodities have remained very high thus far, with growth in China continuing to look solid. Nevertheless, the board considered a decline in credit growth, housing prices and a strong Aussie dollar to indicate tighter financial conditions than normal. 

However, the minutes may be seen as a little stale in the eyes of investors given the recent changes by the Australian Bureau of Statistics with their methodology in calculating consumer prices. The bottom line is we saw a revision to second quarter inflation from 0.9% to a trimmed mean/weighted median average of 0.6%. These measures of underlying inflation are the RBA's preferred inflation measure and used when taking into account there target inflation rate between 2 - 3%. In essence, it can have a significant effect on how the RBA interprets the inflationary outlook. With the Aussie dollar looking decidedly vulnerable below around currently levels of 101.6 US cents a dovish interpretation of the minutes today could see the Aussie continue its slide towards USD parity.