Societe Generale Research discusses some of the current key market drivers and prefers short in AUD and NZD to position in the current risk-off bout.
"A 2 ½% fall in the Shanghai Composite index today, after two days of strong gains, rather sums markets up. The tide - for risk sentiment, for emerging markets and for anything that depends on super-accommodative global monetary policy - is going out, but there are days when the wind, and the mood, go in the opposite direction. Today, the tide dominates again, anchoring bond yields, boosting the yen, and hurting China-sensitive currencies. We like being short AUD and NZD for this trend.
The euro didn't get the lift from the Moody's decision; just the opposite. With a slightly wider BTP/Bund spread as we await a formal rebuke from Brussels should Italy's Government stick to its budget plans, the euro will struggle to find much good news, and continue to bob around in the current range," SocGen argues.