Global growth concerns kept the balance of risk on the side of caution overnight with yesterday's Inflation data from China highlighting the risk of further weakness in the region. Official data released showed inflation slowed to a yearly pace of 2.2 percent in June from a previous 3.0 percent,  representing the slowest rate of inflation since January 2010. Producer prices fell 2.1 percent on year - both releases were in line with economists' consensus estimates. Although the latest inflation data suggests further policy easing measures are on the horizon, the dramatic fall in consumer prices has been viewed as a negative precursor ahead of other key releases this week. While China has in the past made no secret about their intention to tame inflation and engineer more sustainable levels of growth, fears the economy is succumbing to the downside pressure driven by persistent anxiety from the Euro area continues to take its toll.  Economic data out of Japan yesterday also emphasized weakening global demand showing a significant fall in the current account surplus, while machine orders dropped near 15 percent in May.

European equities extended losses overnight as peripheral bond yields continued to rise, suggesting little faith in EU leader's ability to contain the crisis. Spanish debt remained out of favor with the benchmark 10-year yield rising back above the 7 percent region considered the 'bailout zone. ' Meanwhile, European Council members have resumed talks in Brussels in an effort to iron out the finer points of Spain's banking bailout. After pledging up to EUR100 billion in rescue funds, members must now reach a consensus on the conditions of the loan with a memorandum of understanding required to be agreed to in exchange for financial assistance.

Aussie dollar losses were contained at lows of 101.54 US cents in early European trade, reluctantly grinded higher before meeting resistance just above the 102-handle. At time of writing the local unit is attempting a break above the figure but remains pressured around current levels of 102.5 US cents. We've also seen some residual support from higher crude prices with a labor dispute in Norway promoting supply concerns. After touching fresh 2-year lows, the EURUSD followed a similar path but still unable to break out of it current range between $US1.2253 and 1.2325.

The day ahead will see China remain the primary directive for the Australian dollar and risk related assets with June Trade Balance data on the docket at midday. Given recent PBoC policy easing initiatives, there will be a particular focus on changes to imports to gauge changes in domestic demand. Earlier, we have the NAB business conditions index due for release at 11.30am. 

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