AUD/USD was under pressure overnight, losing 1.1% to 1.0328, while risk assets were generally off the table on renewed concerns over the European crisis.

The pair is now back towards its overnight lows, currently trading below 1.03. News that Greek Prime Minister George Papandreou announced a referendum to approve a second EU bailout deal for the country rattled investors. Should the referendum be defeated, all the work put in by European leaders to save the region would have been undone. It could lead to a disorderly default in Greece and bank failures across Europe. AUD/USD also came under pressure following China’s weaker-than-expected manufacturing PMI numbers and an interest rate cut in Australia.

The fallout from the MF Global Chapter 11 filing also resulted in a spike in risk aversion. The markets might stage a relief rally if Mr Papandreou is forced to cancel the referendum, and the Asian market will have to be on the lookout for that type of headline. Locally, traders will be watching building approvals numbers, due out at 11.30am. This is likely to be a non-event as risk aversion remains the dominant theme. It is a big night in the US with the FOMC meeting set to take place. No policy changes are expected, but investors will be looking for more clarity regarding a potential QE3.