The rally in risk that pushed US stocks significantly higher into the close last night begun to dwindle in Asian hours.  Asian stocks closed higher on the day but well off their intraday highs and European stock indices are mixed to lower.  EUR/USD pushed lower in Asian hours as stocks started to lose support.  In London,  USD sellers started to re-emerge as HSBC's trading statement reassured investors but EUR/USD again fell back from 1.500 on the back of a worse than expected German Nov ZEW survey (51.1 from 56.0 in Oct).   EUR/JPY had remained little changed from last night's close through most of the session but jumped sharply mid-morning amid talk of a flow linked to a Sovereign bond flow allowing EUR/USD to move off its post ZEW low.

USD sellers have the reassurance that the neither the central banks, US payrolls data or G-20 came up with anything last week to trip up the decline of the greenback.  However, the decline of the USD is going hand in hand with the demand for risk, and given there are still significant hurdles to be overcome before most of the G7 return to trend growth, a move towards EUR/USD1.5250 and beyond could be further away then it seems. 

Indecision about whether the risk trade is on or off this morning has seen AUD/USD trading a 0.9260 to 0.9290 band in London hours.  In Asia the AUD has traded as high at 0.9319 on the back of a rebound in business confidence before dwindling confidence in the risk trade and talk of weaker Chinese trade data tomorrow sparked profit-taking.   Australian business confidence had been hit by the RBA's recent two rate hikes.  It now seems likely that the RBA may not hike rates again until February. 

Sterling has performed poorly this morning against both the USD and the EUR.  The statement from Fitch that of the four large AAA sovereign debt issuers (UK, US, Germany and France), the UK was the most likely to be downgraded undermined the pound and knocked cable back to USD1.66 from USD1.6750.  The news is not new, however.  S&P in May revised the UK debt's outlook to negative.  Also, Fitch has indiicated that it has no plans to change the UK rating.  The UK trade minister has been on the wires reassuring investors that the UK's AAA rating is safe and that the government is taking action on deficit reduction and this theme has been reiterated by Prime Minister Brown.  That said, the appalling position of UK public finances is likely to be a restrain on the sterling vs the EUR for many months yet.  UK trade data this morning was another disappointment for the pound.  The visible trade deficit widened to GBP7194 mln from GBP6073 mln providing no evidence that sterling weakness is helping the UK economy out of its recession.  EUR/GBP has retreated away from the 0.8900 support. 

This afternoon US ABC confidence is due.  The Fed's Yellen and Lockhart are scheduled to speak.