Well, so much for yesterday's rally. Once again Greece hits the headlines, as yesterday's denial of a German assisted bailout is finally registered by the market. Nonetheless, some of the losses were pared after new French reports signaled help was on the way.

First, a recap of the numbers: (as of 20:30 GMT)
EURUSD : 1.3740 (-40 pips)
GBPUSD : 1.5588 (-116 pips)
AUDUSD : 0.8758 (-20 pips)
USDCAD : 1.0620 (-62 pips)
GOLD : 1070.00 (- $5.50)
CRUDE OIL : 74.50 (+ $0.50)
S&P 500 :1065 (-2.75 points)

What's really going on?

Yesterday, we questioned whether yesterday's risk appetite rally was anything more than a bounce combined with short covering. The answer came quickly as Forex traders wasted no time in a return to selling the euro. What today's trading reveals is that Forex traders aren't ready to move on, and are worried about the fallout that would occur if Greece would go bankrupt. On a side note, a CNBC interviewee had a grat quote about yesterday saying that Greece has been on the brink of economic collapse for the past 100 years, and they have always seemed to roll along.

Also occurring today were Trade Balance numbers from China, the US, and Canada. The US numbers showed a greater than expected deficit, but also revealed export growth. Dollar bulls used the growing export numbers as an excuse to buy dollars. As a result, the EURUSD traded down to a low of 1.3680, after being above 1.3800 yesterday.

Pound hit by BoE Inflation Report

The big loser today was the pound. The GBPUSD is down over 100 pips on the day to 1.5585, as the BoE's inflation report appears to have convinced Forex traders that the BoE may reinstate its QE policies. The BoE's outlook was for worse than expected UK growth in 2011 and low inflation levels. On the positive side (and this initially led to gains in the pound), BoE Governor Mervyn King believed that the UK will continue its gradual recovery and risks of another economic contraction appeared limited.

In the past, the BoE has had a habit of being conservative and attempting to lower market expectations. If so, the pound could be in line for an upside move, if we do in fact see better than expected economic numbers released.