The euro dollar exchange rate is 0.38% lower on the day with EUR USD at 1.3593. The pound dollar exchange rate is 0.23% lower with GBP USD at 1.5623. The recovery in risky currencies in Asia has helped fuel a more positive assessment in global markets. However, this risk-on sentiment has dissipated somewhat as there are a few crucial Eurozone related events coming up. Looking at the US dollar exchange rate we see that the cross-currency basis swaps in Korea and Malaysia narrowed significantly for a fourth session on Monday suggesting that USD dollar based funding stress in these key Asian countries has eased up. This may be partly due to the additional QE policy measures announced last week by the ECB and BoE and the planned USD 3mth term auctions scheduled by the ECB, BoE, SNB and BoJ (the first of three auctions will be held on Wednesday 12 October). A morning currency note from RBS says: "Funding stress moves hand-in-hand with risk appetite, so it is unclear as to the which is the driving factor, but the bottom-line is that funding stress in European banks has not further spilled over into a global squeeze on USD liquidity. "This is allowing the market to shift back somewhat to earlier themes of seeking alternatives to the troubled major economies and boosting commodities and emerging currencies. "Positioning in the market has also been cleaned out significantly in riskier currencies over the last month." Hence these currencies have had the capacity to rally on news surrounding progress in Europe, where the French and German leaders have promised much by the end of the month, although to date policy-makers have been unable to prevent the European crisis from worsening. In particular, while politicians acknowledge the urgency to act, problems continue to arise when the details need to be sorted out and voted on. As such, we may be nearing a point where the markets will require action from politicians before they can rally much further.

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