Global markets continued to succumb to Euro dramas overnight with Cyprus now joining the growing list of European nations requesting financial aid. In a Statement the Cyprian Government noted The purpose of the required assistance is to contain the risks to the Cypriot economy, notably those arising from the negative spill over effects through its financial sector, due to its large exposure in the Greek economy. Although analysts expect Cyprus will need to tap the EFSF for a relatively small EUR4-6 billion compared to that of significantly larger needs for Greece, Ireland, Portugal and Spain - it's a testament to the challenges smaller Euro-region countries are facing given the contagion effects of its larger neighbors.  

For broader risk trends, it appears a case of 'once bitten, twice shy' across markets ahead this week's EU summit given the risk of disappointment European leaders will once again fail to produce a palatable crisis-fighting blueprint at this week's meeting. This may present a case for moderate value across risk currencies in the lead-up as market participants attempt to neutralise positioning ahead the event, which is of course contingent on the usual barrage of headline's risk coming from the region.

Greece's plight to regain economic composure suffered yet another setback overnight with Finance Minister Vassilis Rapanos resigning for health reasons. Prime Minister Antonis Samaras who has also been hospitalised this week for eye surgery is not expected to attend the EU Summit which begins on Thursday. Meanwhile, Spain couldn't escape the spotlight with government bonds recording losses across the curve after what appeared to be significant signs of improvement late last week. Spanish debt yields of a 10-yr maturity bounced off lasts weeks close of 6.25 percent to around 6.6 percent over the course of the session with investors flocking to the safety of German bunds. Spain has now formerly requested financial aid in order to recapitalize its struggling banking sector with a capacity of up to EUR100-billion able to be borrowed on a conditional basis.

Currencies displayed a typical risk-off demeanour with the U.S dollar - and to a greater extent - the Japanese Yen recording solid gains against major rivals. The Euro made a break to the downside of $US1.25-figure overnight falling to lows of $US1.2470 before moderate buying kicked-in with commodity currencies the AUD and NZD following a similar path. The Aussie dollar saw deep losses against the perceived safety of the Yen and remained out of favour against the greenback  coinciding with deep losses across sentiment barometers such as the S&P500 which fell 1.6 percent. The AUSUSD pair fell to lows of 99.68 US cents before a mild reprieve carried price action back above parity. At the time of writing the Aussie dollar is trading just shy of parity with regional equities markets likely to provide direction in domestic trade. Assistant RBA Governor (Financial Markets) Guy Debelle will today be a panel discussant at the Mortgage and Finance Association of Australia in Adelaide.