After a period of relative stability, the Euro's more negative attributes began to reassert themselves overnight, with the EURUSD pair falling below the 1.23 region for the first time this week. In what may be seen as mix of profit taking and technical based moves, mild downside breached various points of support, in turn promoting further short-term weakness with the pair hitting lows of $US1.2266.

Despite the south-bound Euro, the Aussie dollar failed to lose too much of its sheen with short-term dips met with solid demand. The local unit also resumed a downside trajectory against the Euro with the pair falling just shy of euro-era lows to 1.1611. We've seen a similar theme of Euro weakness across major counterparts with the currency hitting a 12 year low against the Swedish crown.

Stronger than anticipated employment growth provided a key inflection point for the Aussie dollar yesterday, while Chinese inflation fell further in July, in what many consider a precursor to further easing initiatives from the region. Nonetheless, yesterday's less than inspiring New Zealand jobs data kept the Kiwi in a losing position overnight despite some residual support across the Tasman.

China's latest consumer price data showed inflation moderated to a yearly pace of 1.8 percent in July down from a previous 2.2 percent, representing a 30-month low. While consumer inflation enters the perceived sweet-spot worthy of further policy easing, the PBoC's (Peoples Bank of China) choice of ammunition may need to be a little more complex with the latest producer price index continuing a rapid descent. Yesterday's data showed producer prices fell at yearly pace of 2.9 percent in July, in excess of the -2.5 percent anticipated. Meanwhile, weaker than expected growth from industrial production and retail sales adds credence to expectations the PBoC will soon put their foot on the accelerator.

Today will see the focus shift back to the RBA with the quarterly Statement on Monetary Policy on the docket. Market participants will be watching closely for the release to elaborate on Tuesday's policy statement from Governor Stevens, which highlighted the disparity between fundamental drivers and the Australian dollar's unwavering appeal, despite a marked decline in terms of trade and weaker global growth expectations. Also in the frame today is the release of Chinese trade data which is expected to see the surplus widen to $US35 billion in July from a previous $31.7 billion. While export growth is expected to moderate in July, the value of imports will be of particular interest given concerns of a further decline in domestic demand. At the time of writing the Australian dollar is buying 105.8 US cents.

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