The recent risk aversion theme may be ripe for a pause, and could be replaced by a more cautious tone that might benefit the USD and JPY against the main European currencies and “risk currencies,” which encompass the commodity correlating ones and emerging market units. Signs of this started to emerge in Asia, with stock markets succumbing to some profit taking. While Q2 corporate earnings have been the obvious catalyst of the recent rally in global equity markets, with results so far from U.S. S&P 500 companies beating estimates by a wider margin that at time since at least 1994 (according to Reuters data), this has not been driven by a rise in revenue and instead by economizing measures, which, given this implies a negative impact on pay awards, may bode poorly for future revenue potential. It should also be pointed out that expectations were coming from a very low base. Meanwhile, some focus should remain on the record levels of U.S. government paper supply, especially after the sloppy 2-year sale yesterday, and investor appetite at today’s $39 bln in 5-year note auction will be monitored. The Fed will release its latest Beige Book today, which is likely to reflect continued signs that the recession may have bottomed in Q2. European calendar highlights include U.K. mortgage data.