After an attempted rebound yesterday on talk of a statement from Germany and France on the Greek debt crisis, the euro came under renewed selling pressure late in the day and overnight. A teleconference between all three is now reported to be taking place later today but markets are holding out little hope that this will ease concerns over the sovereign debt problems. German Chancellor Merkel sought to ease fears over a possible Greek bankruptcy, saying that an “uncontrolled insolvency” must be avoided. However, the euro’s downtrend is expected to remain in tact as events continue to unfold. Reflecting fragile market sentiment stocks were lower overnight, with comments from Chinese Premiere Wen that China will continue to offer support to Europe in terms of bond purchases only offering mild support. In return for China’s support, Wen noted that Western nations must do more to solve the debt crisis and to protect foreign investors.

Although still off its high, sterling is holding onto much of its gains versus the euro but remains on the back foot versus the dollar on persistent concerns about additional QE in the UK. This morning sees the release of key UK data including the unemployment level for August. This is expected to show a further rise in the numbers claiming unemployment benefit. Other data to watch today include US retail sales and producer prices for last month. The AUD slipped in overnight trade on the back of news that key measures of underlying inflation have been revised to show that they rose by much less than initially reported in Q2, which will be of relief to the central bank as it weighs up the case for a further hike in interest rates. The Reserve Bank of New Zealand makes a policy announcement tonight, which will help set the tone for the AUD and NZD.