Last weekend's announcement of the massive EU/IMF bailout has yet to achieve the effects sought by its architects. Yield spreads in Greece, Spain and Portugal have not yet returned to normal levels. In FX, the EURUSD continues to erode at an alarm rate - trading down to 1.2606 as Europe opened this morning. Given the extreme short positioning on the EURUSD, a short squeeze could easily gain downward momentum. One of the core drivers for this move is low liquidity, as many market participants are sidelining their cash in traditional wait-and-see fashion. The EURCHF continues to nervously hover around the 1.4000 level. There are rumors of large options at this level which supports suspicions that this may be the new SNB floor level. Yesterday, the SNB's Hildebrand reaffirmed the central bank's commitment to an interventionist policy by vowing to actively handle any excessive appreciation that might generate deflation. According to official data - the rate of FX reserve accumulation by the SNB is accelerating at a breathtaking pace. While in theory there exists no ceiling to intervention, the SNB must be concerned about its increasingly lopsided balance sheet. As massive Euro accumulation continues, unwinding this unconventional position will become more and more difficult. We suspect any upside in the EURCHF is limited in the near term. Up in the UK, the big news was obviously the Conservatives and Liberal Democrats agreeing to form a coalition government, with David Cameron as the new Prime Minister. The shift in UK politics and Gordon Brown's resignation will broadly be sterling positives. The important information for the GBP today will be the release of the May Inflation report. The report will most likely be toned down considering the current stress on the global economy, don't be surprised to begin hearing hawkish language coming from the BoE. Inflation is already well above the MPC target and many are beginning to question the wisdom of the BoE's ultra-loose monetary policy. Although the structural concerns about the Eurozone remain, the larger systemic risks to the global financial system have waned. The flat close in US stocks yesterday and this morning's strong Shanghai rally, juxtaposed with price action in commodities such as Gold - all lend credence to a gradual return of risk appetite and that systemic fears are subsiding. To keep abreast of this sentiment, we'll continue to gauge risk appetite by watching price action across equity markets.