The big news overnight has been the RBA's decision to cut Australian interest rates from 4.75% to 4.50%, citing weaker commodity prices, slowing growth in China, and high level of the currency among reasons for the move. Furthermore, the statement indicated that the downtick in inflation outcomes has allowed them to shift from a mildly restrictive policy bias to a neutral one. Whilst the rate cut was in line with median forecasts going into the announcement, that view was not at all unanimous - with 11 of 27 analysts polled by Bloomberg calling for rates to stay on hold. Given this lack of consensus, there has been an significant reaction in the currency, with AUDUSD tumbling from 1.0530 levels to 1.0387 lows. While the AUD is clearly one of the worst performing currencies on the day, virtually all the majors are losing ground to the dollar this morning as risk appetite continues to take a beating.

One of the contributing factors to the bearish mood is that China's manufacturing PMI came out lower than expected this morning, dropping to 50.4 compared to prior estimates looking for a rise to 51.8 (previous month's reading 51.2). In turn, Asian equity indices have had a difficult day with the Nikkei -1.70%, Hang Seng -2.5% and Shanghai Composite up a meagre 0.1%.

Meanwhile, the grace period for the latest Greek rescue deal appears to have come to a rapid end, and investor concern is already focused on potential instability within the troubled nation. Prime Minister George Papandreou and his government face a confidence motion in Greece's parliament this week, along with a referendum on the proposed second rescue package in the coming months. Both these events pose considerable political risk, and as such are unlikely to facilitate the implementation of necessary austerity measures going forward.

Coming up, UK advance Q3 GDP estimates are due to be released this morning and are expected to show a paltry 0.3% QoQ, 0.4% YoY pace of growth after the anaemic performance seen in Q2. There are also some PMI manufacturing figures due out of Europe and US ISM manufacturing survey.

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