Investors turned cautious ahead of the Greek election. Sentiment was dampened further as Moody's downgraded Spain's credit rating by three notches while the US economic data disappointed. Wall Street slipped with the DJIA and the S&P 500 losing -0.62% and -0.70% respectively. In the commodity sector, the front-month contract for WTI crude oil dropped -0.845 while the equivalent Brent crude contract was largely flow during the day. The benchmark Comex gold contract rose for a second straight, rising to the highest level in 4 days and ended the day with +0.35% gain yesterday. Weakness in US data sent the greenback lower and reinforced QE3 hopes.

Moody's downgraded credit ratings of Spain by three notches to Baa3 from A3 as the bailout fund would raise the country's debt burden and it would rather be a sign of weakness instead of a sign of strength. Moreover, the rating agency stated that the Spanish economy's continued weakness makes the government's weakening financial strength and its increased vulnerability to a sudden stop in funding a much more serious concern than would be the case if there was a reasonable expectation of vigorous economic growth within the next few years. Currently, Spain's credit rating is only a notch above junk bonds and Moody's said that further downgrade would be likely as there is an increasing risk of Spain needing to ask for more support in the coming months or in the coming years.

On the dataflow, the US retail sales surprisingly contracted -0.2% m/m in May after a +0.1% gain a month ago. Excluding auto, sales dropped -0.4%, compared to a +0.1% rise in April. Headline PPI in May fell -1.0% while the core reading added +0.2%, compared to +0.2% in the prior month. The decline was mainly driven by energy prices which plunged -4.3%. Food prices also fell- 0.6% during the month. Weakness in US indicators sent the greenback lower and raised speculations of further easing from the Fed.

The RBNZ left the OCR unchanged at 2.5% in June although it noted that New Zealand's economy has weakened a little since the March MPS and economic stresses have intensified in Europe . The central bank has postponed its first rate hike from late this year to next but the overall interest rate track is just slightly lower. GDP growth forecasts were reduced with current potential growth at +1.2% while the average for the coming 3 years at +1.8% for the next three years. These forecasts were much lower than those made in March. Concerning future monetary policy outlook, we believe the RBNZ would keep the door open for further easing if the macroeconomic situation deteriorates further.

At the quarterly SNB meeting today, policymakers would leave the policy rate unchanged at the June meeting. Moreover, policymakers would reiterate the commitment to enforce the minimum exchange rate of CHF 1.20 per euro. Amidst the highly uncertain and volatile situation in the Eurozone, the SNB's determination is especially important as the lack of which would be interpreted as an invitation for capital inflow and further appreciation of the Swiss franc.