After a period of relative calm, Greece's economic plight has taken the limelight once again this week, as concerns mount the country may not qualify for its next bailout installment. The EU, IMF and ECB - known as the Troika - are currently in Athens to assess conditional targets which need to be met before the next tranche of financial aid is dispersed. Recent reports suggesting Greece will need to undergo another debt restructure and may not receive the vital funds needed to meet near-term debt obligations, have once again given weight to conjecture Greece will eventually exit the Euro-Zone umbrella. Borrowing costs from Europe's periphery continue to reflect deep concerns Spain will be the next on the list of bailout casualties, with Spanish 10-year bonds rising to fresh euro-era highs of 7.64 percent overnight.

In economic new, German manufacturing PMI fell greater than anticipated in July with gauge showing an index level of 43.3 from 45 in June, while Euro-Zone manufacturing PMI shrunk to 44.1 in July from a previous 45.1. Across the Atlantic, softer than anticipated reports on the health of U.S manufacturing report kept the balance of risk on the side of caution, with both the Richmond Fed and Markit PMI reports failing to meet expectations.

The Euro resumed its decline overnight, forging fresh 2-year lows against the greenback, and near 12-year lows against the Yen. The Aussie dollar folloed suit but was able to outperform the Euro once again with the EURAUD pair falling to lows of A$1.1736. The local unit also resumed a decline against the in-form U.S dollar, dragged lower by global bid for safety in light of the flare up in the Euro region. Despite a reasonably solid domestic session on the back of better-than-expected HSBC Chinese PMI and an optimistic speech by RBA governor Glenn Stevens, broad losses from U.S equity markets found the local unit in a vulnerable position, falling to lows of 102.14 US cents in recent hours.

The day ahead will see the focus turn to second-quarter consumer price data due for release at 1130 AEST. Headline inflation is expected to rise 0.6 percent in the second quarter, representing yearly growth of 1.3 percent, from a previous 1.6 percent. The RBA's preferred measures of inflation which excludes the most volatile prices on the scale, is forecast to rise 0.6 percent on quarter to represent annual growth of 1.9 percent - below the RBA's 2-3 percent target range. This round of data is of course a timely and influential gauge of inflation growth ahead the RBA's next policy meeting in early August. While slower consumer price growth provides further breathing space for the RBA, it's unlikely to represent the evidence needed to prompt Stevens and Co to further cut the official cash rate when the bank meets on August 7.

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