Greece remains in the spotlight as it dithers towards approving austerity measures required for the Troika’s consent of further bailout funds. The risks are high with a possible disorderly default and Eurozone exit on the cards if a deal cannot be reached.

As this story seems to dominate headlines market anxiety is increasing as reflected in the fall in global stock markets and dive in risk assets in general during Asia trading. Overnight the Reserve Bank Of Australia surprised markets by maintaining rates on hold sending the AUD higher. Later this morning we have German industrial production data, however neither of these will be considered important enough to avert attention and calm nerves as markets await further Greek developments.

Going against many theories, the drop in EUR/CHF cannot be credited to increased risk aversion. One should note EUR/CHF is a further currency pair that is strongly linked with interest rate differentials. In reality, its high sensitivity provides a firm justification for the drop in EUR/CHF since Christmas last year. This shift has taken place regardless of a development in risk appetite over this period, a feature that would usually be connected with Swiss weakness.

Finally, the IMF warned yesterday that a Euro recession would prove extremely harmful to Chinese growth. The global body urged Chinese authorities to defer any reduction in government spending and instead to target deficit of 2% GDP. In the event of a global recession China “should respond with significant fiscal package, executed through central and local government budgets” according to the IMF. If we take the World Economic Outlook’s worst case scenario 1.75% global economic reduction, China’s growth could fall up to 4%. However if shocks are avoided the IMF expects Chinese growth slightly above 8%.