London saw another mixed session for risk as better economic data was offset by some dovish China comments. On the data front, the German IFO business surveys for August all printed better than expected. The highlight was the jump to 95.0 in the expectations index, from a 90.4 read the prior month. This quickly helped equity marts rally and the risk trade extend. China released comments later in the session that would nip the rally in the bud, however. The Chinese cabinet announced plans to curb excessive investment in sectors facing overcapacity. While a touch obscure on the face of it, it does suggest a ratcheting down in Chinese spending short-term †not good for the global growth outlook.

EUR/USD went for a ride on the back of the mixed news. The pair shot up to a session high 1.4348 where it found good offers. The pessimistic news eventually sent it into freefall towards the 1.4270 zone. Hearing a good amount of stops just below current levels, thus a sharp break through here could elicit some fireworks. Cable came crashing down as well. GBP/USD plummeted from a 1.6353 high to sit near 1.6250 ahead of the NY open. The other story is commodities. Oil remains under pressure on the China comments and trades well below the $72 mark. This has seen AUD/USD trade better offered into 0.8320/10 while USD/CAD remains bid into the 1.0900/10 zone.

 The highlights in NY trading look to be the durable goods report at 830am ET and new home sales at 10am ET. It looks like we will need to see much better than anticipated results here to see the selloff in risk reverse. Stay tuned!