After a peaking above the 106 US cent region late last week, the Aussie dollar's risk credentials came to the surface overnight, taking a broad leg lower against its major counterparts. The AUDUSD pair slipped to lows just below 105-figure which was once again was met with support to stabalise around current levels of 105.15 US cents.  In contrast, we've seen the Euro post moderate gains against the greenback and also a notable reversal against commodity bloc currencies the Aussie and Kiwi, with the EURAUD pair rising over a cent higher from near euro-era lows seen on Friday. Interestingly, if we look at a broad index of European equities, we can see since the 2012 lows were set in early June, the FTSEurofirst 300 index has rallied around 15 percent. In this same period the Euro's fallen just over 1 percent which may add to weight to the argument the Euro's due for a short-term reprieve as markets close the gap.

Peripheral bond yields eased slightly overnight as an Italian debt auction was met with solid demand, while the latest GDP report from Greece showed growth fell at a slower pace. Equities from both sides of the Atlantic recorded moderate losses, but still managed to come on relatively unscathed with Euro-STOXX50 and S&P500 indices finishing down 0.30 and 0.13 percent respectively. There's a hybrid of influences driving markets at the moment from stimulus expectations to global growth concerns. These growth concerns were highlighted yesterday after Japan's preliminary GDP release showed second-quarter growth of 1.4 percent from a year earlier, well under expectations of 2.3 percent.

Meanwhile, U.S markets are second guessing the level of stimulus expectancy baked into to recent strength, highlighted by the stronger than expected payroll data seen recently. If stimulus expectations are recalibrated, this is a natural dollar-positive event and by default will come at the expense currencies that have benefited most, such as the Australian dollar. Likewise the appeal of the Aussie dollar may have also taken a moderate downturn given the lack of new easing measures out of China.

The day ahead will see the release of some relatively low-impact data with NAB business confidence and new motor vehicle sales for July, while Chinese data on foreign directive investment is also expected to be released in local hours. Across the Tasman, the release of second-quarter retail sales will also be closely watched and may prompt some residual moves from the local unit.

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