After a day relative stability, global equity markets resumed a downward trajectory overnight with Europe's debt crisis front row and centre. The balance of risk remained supportive of safety-plays forcing solid losses across high-beta currencies with the Aussie dollar a primary casualty. The Aussie dollar took a hit in the ensuing period of yesterday's retail sales data and the momentum continued overnight with price action moving to lows of 97.05 US cents. A global bid for safety saw a natural move to the perceived safety of the US dollar and Japanese Yen while demand for U.S debt pushed 10yr yields to a record low.

The deeper the rot, the deeper trouble for countries such as Spain and Italy given the lack of demand for their respective debt - Borrowing costs from Europe's most vulnerable nations continued to rise with Spanish 10yr yields moving ever closer to the 7 percent 'bailout zone' while a debt auction in Italy fell short of target. Further concerns over the Spanish banking system remain a negative thematic with government plans to recapitalise Bankia using debt instead of cash  reported to have been rejected by the ECB. 

The Euro's latest rout is a testament to the fear and anxiety in the market with breaking $US1.24 overnight to fresh 23-month lows of $1.2360. We also saw notable depreciation across the channel with cable falling below the $US1.55-figure for the first time since mid January.

Local data in focus today includes private sector credit, private capital expenditure and building approvals which are due for release at 11.30 AEST. Capex data is expected to bounce back with a 4 percent rise in the first quarter after a previous contraction of 0.3 percent. Although traditionally mid-tier risk events, we expect less than inspiring print on both capital expenditure and private sector credit to keep the downside momentum alive with 96.6 / 96.8 US cents likely to contain selling before we're once again at mercy of European headlines and U.S jobs become a focus ahead of Friday's official employment report. There's plenty of fresh air below 96.6 US cents and we anticipate a further breakdown in confidence to promote stronger downside momentum with 93.85 US cents the next technical target. At the time of writing the Australian dollar is buying 97.1 US cents.