Dutch Dissolution Weighs, Aussie CPI Next

The Dutch Prime Minister and his entire cabinet resigned on Monday, sending a shudder through European markets. The yen was the best performer while AUD lagged ahead of first quarter inflation data. The calendar was light on Monday ahead of a busy week. The euro staggered into US trading, falling to 1.3220 on worries about China and political upheaval in Europe. The concerns were ratcheted higher as the Dutch PM resigned along with his entire cabinet. Monday's Premium Intermarket Insights include EURUSD, AUDUSD and Gold.

The round of risk aversion than followed sent Spanish 10-year yields back above 6% and the euro down to 1.3104. European stocks tumbled once again with the French CAC closing at the lowest level of 2012 and broad European indexes down 2-3.8%.

The euro worries ebbed once European markets closed and it eventually recovered above 1.3150. Cable, similarly, fell to 1.6078 before climbing back to 1.6125.

A slight change was noted in comments from Bundesbank President Weidmann. He said that if bond buys are needed, then the ECB should do them. Nowotny also said the ECB can act in a very forceful way if needed while saying bond buys are in sleep mode.

The key event of the upcoming session comes at 0130 GMT when Australia releases Q1 CPI. The consensus is for a slide to 2.2% y/y from 3.1% y/y in Q42011. The trimmed mean is expected at 2.4% y/y. In the most-recent RBA statement, policymakers warned that this will be an important data point. Recent indications may have put a slight downside bias into the market but any miss from the consensus will spark a reaction in AUD.

At 0200 GMT, the Conference Board's leading index for China will be released. Merkel also continues meetings with Chinese Premier Wen Jiabao in Germany.

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