With the currency market in full risk-off mode this morning, let's be clear that this is a move driven by deleveraging and not relative balance sheet expansion. The decision to cut interest rates by the central banks of South Korea and Brazil over the past 24 hours confirms that policymakers around the world are intimidated by the risk of slower global growth in the second half of the year.

With no major economic data or news catalyst, investors had been gradually swapping euros and other risky currencies for the U.S. dollar and Japanese yen throughout the European trading session. This selling exacerbated into North America with the EUR/USD breaking below 1.22 and hitting a fresh 2-year low in the process. The modest rise in Spanish bond yields cannot be blamed for the euro's weakness and the amount of tension in the market tells us that this move is driven by