Just as the stress test advocates were getting ready to declare Friday's results a success due to a selloff in USD and rally in equity markets, we then ran right into a summer whipsaw.

The broad majority of G10 currencies sharply reversed their brief trends with today's European open. Yesterday's wave of risky asset investing lacked any solid drivers, so the momentum was bound to falter. Commodities continue to trade well (the exception being Gold) as Crude Oil continues to test the top part of its ranged resistance at 79.50. Commodity currencies should continue to be supported and could even receive a decent push in the near-term. AUDUSD traded about its 200 day moving average for the first time since May, while EURUSD traded about 1.3000. However given the frivolous nature of the current low-liquidity trading environment, we suspect the tide will change again.

The markets did view the stress tests as a minor positive, as slightly increased transparency is always good, sovereign bond spreads only tightened slightly. The tests failed to truly address the concerns of the market, especially because some EU banks refused to disclose their sovereign debt holdings. Due to several German banks refusing disclosure, German yields were pushed higher.

On a side note, Basel III announced yesterday that the members had come to a historic agreement to tighten capital requirements and start worldwide liquidity & leverage rules. Most likely, they'll reduce some of their proposals while postponing others.

FX markets should settle into a period of consolidation this week as a lack of economic data will hinder any large decision making processes. Forex-Chart

Today's Key Issues (time in GMT): 07:30 SEK PPI (Jun); exp: 0.2% MoM, 0.5% YoY, prev: 0.0%, -0.5% 08:00 EUR M3 (Jun); exp: -0.1% YoY, prev: -0.2% 14:00 USD Consumer confidence (Jul); exp: 51.0, prev: 52.9 14:00 USD Richmond Fed (Jul); exp: 12, prev: 23