The headlines this morning are dominated by news that ratings agency S&P has downgraded Italy's long-term debt to A from A+, maintaining an outlook negative. This comes as an additional blow to confidence as critical talks between the troika (EU, ECB and IMF) and Greece are already putting pressure on EURUSD and equity markets. The government announced that a further conference call between the sides would take place later today (17:00 GMT), with results of the talks anticipated as early as Wednesday. It seems from these early talks that the troika is willing to release the next instalment of EFSF cash to Greece in exchange for further austerity measures; in line with the speculation that had been swirling yesterday morning. For now, the official message is that talks have been constructive, but in worrying contrast a story published in Greek newspapers suggests that PM Papandreou is planning a referendum on Eurozone exit, with a bill possibly being pushed through parliament in the coming days. Were it true, such a scenario would certainly throw a spanner in the works and have a devastating effect on financial markets, but thus far the story has not gained much traction.

Overnight, the RBA minutes were released; the central bank noted that developments abroad certainly posed a high risk to the outlook, but putting a positive spin on the situation they believed this would provide an effective factor that could contain domestic inflation. Most of the information contained in the minutes was the same as we got with the RBA statement on the day of the meeting; in the currency space, a short squeeze just before the release took AUDUSD from 1.0190 levels up to a high of 1.0259, but once the release had been digested we settled back below 1.0200.

In other news, SECO (the Swiss State Secretariat for Economic Affairs) published its Sep 2011 economic forecasts this morning and unsurprisingly the news was gloomy. The latest GDP estimates for Switzerland were revised down to 1.9% in 2011 (from 2.1% prior) and 0.9% in 2012 (from 1.5% prior).

Coming up this morning we will get Sweden's final GDP numbers for Q2, followed by September ZEW survey results out of Germany and the broader Eurozone. This afternoon, US housing starts and building permits are the only significant releases, but expect most focus to reside with the upcoming Greek conference call.

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