These factors combined to see equities lower, yields lower and the AUD underperform. The USD is a little higher as JPY continues to sell off.

​While none of the news overnight was horrible, it was a just a little disappointing. Add to this higher oil prices, driven by continued Iran tensions and it leaves markets uncertain about the global growth direction ahead. The moves are not convincing and it is likely that we need to see far more data before they can be backed up.

There is very little out in today’s Asia session, which is likely to see a consolidation in the underperforming AUD. The lesser monitored Australian average wages data is released but doesn’t tend to move AUD (+1E, 1.2P). The Reserve Bank of Australia's Ellis is speaking at a mortgage conference today, which may bring up some interesting comments. There are a variety of interesting topics surrounding Australia’s mortgage market at present, ranging from bank spreads, household leverage rates, household savings rates and supply versus demand pressures on housing prices. All of these have varying influences on policy, which in turn may move AUD.

The AUD is weaker as markets unwind longs in the face of some uncertainty in Europe and global demand, rather than in Australia itself. This is the reason why AUD/EUR is moving lower, despite the centre of the storm being in Europe. Today we get German IFO data (108.8E, 108.3P). Last night, the European producer manufacturing index (PMI's) were disappointing, having fallen back below the 50 breakeven level (EU composite PMI 49.7A, 50.3E, 50.4P), with deterioration in both manufacturing and services. Germany is expected to have started to recover in Quarter 1 2012, and remaining the backbone of European growth. Any downside miss in the IFO is likely to see a greater reaction in EUR than to the PMI's.

JPY sell off has moderated a little this morning, after hitting a seven month USD/JPY high of 80 yesterday. With US yields moving lower overnight it is likely that the relentless selling of JPY in recent days may pause. We continue to believe that it is the yields that are the stronger driver of a JPY sell off, if there is a resumption of higher US yields, then USD/JPY is biased to move higher. A break lower again in yields, possibly on a dovish slew of comments by US Federal Reserve members tomorrow (Bullard, Plosser and Dudley speak), may move USD/JPY lower.

• EU PMI was disappointing (49.7A, 50.3E, 50.4P).

• Bank of England minutes showed a more dovish board, with two members looking for 75 billion in asset purchases rather than the 50 billion done.

• US home sales were better on the headline, but previous revisions were significantly lower (4.57mnA, 4.66E, 4.38P from 4.61).

• China flash PMI 49.7A, 48.8P but export orders dropped.

• Australia is facing a Prime Minister ballot on Monday.