> Currencies At Risk for Deeper Setbacks Against US

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Euro declines have accelerated over the past few sessions, and the escalating negative sentiment towards the Eurozone have negatively influenced the rest of the currency market with sentiment shifting dramatically lower. A crushing defeat of the ruling Socialist party in Spain, and a rapid loss of support for the government in Greece have been key drivers of the latest price action, while serious concern over massive levels of debt of regional and municipal Eurozone governments has also played a major role. A report in Monday’s Der Spiegel highlights these risks after saying that "banks, above all from Greece, Ireland, Portugal and Spain, have provided as collateral, asset-backed securities that are unfit for central bank loans as their debt rating is low or non-existent". This has opened a fresh wave of selling in EUR/CHF which has broken to yet another record low below 1.2400 on flight to safety buying.
Elsewhere, the Pound has been finding some relative strength, with some very hawkish comments from Bank of England’s Dale propping the UK currency. The central banker has said that locals should prepare for rate hikes over the next couple of years and that while he concedes that the monetary policy reversal will be difficult, he feels that the risks to longer-term inflation are more severe at this point and need to be addressed. Meanwhile, the antipodeans have been getting hit hard as the negative risk themes take hold, with the Australian Dollar coming under added pressure after China HSBC manufacturing PMIs came in at its lowest level in 10 months. Any signs of cooling in the China economy should weigh heavily on the correlated Australian Dollar going forward.
The outlook for the US Dollar is looking increasingly constructive, with all major and minor currencies showing relative weakness against the Greenback, and should the current negative risk sentiment environment remain, we would expect to see the buck find more safe-haven bids going forward. Looking ahead, key economic releases on the day include; Swiss money supply, German manufacturing PMI, Eurozone services PMI and the US Chicago Fed National Activity Index. US equity futures and oil prices are tracking a good deal lower while gold is marginally offered.

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