The Euro and the British Pound sold off overnight, falling in with a broad move toward risk aversion (see below). We remain long USDJPY and are looking to enter short EURUSD and GBPUSD.

The US Dollar outperformed in overnight trade, adding as much as 0.5 percent on average against its top counterparts, as stocks slumped to drive safe-haven demand for the benchmark currency. The MSCI Asia Pacific regional benchmark index fell 0.7 percent. The selloff began with negative cues emanating from Wall Street after the Richmond Fed gauge of manufacturing activity disappointed, with downward pressure compounded by EU sovereign risk fears following a Reuters report of a potential snap election in Greece as well as a Spiegel story saying the ECB has accumulated significant risk on its balance sheet.

Japan's Merchandise Trade Balance posted a deficit in April as exports continued to reel from the fallout of the Tohoku earthquake which had taken production capacity offline and disrupted deliveries. Overseas sales shrank at an annual pace of 12.5 percent, the fastest in 18 months. The deficit proved narrower than expected at 463.7 billion as import growth fell short of forecasts at 8.9 percent. With that in mind, a deepening of the trade gap seems likely in forthcoming reports as they increasingly reflect the toll of the quake on manufacturers as well as inbound shipments swelled by the reconstruction effort.

The revised set of first-quarter UK Gross Domestic Product figures headlines the economic calendar. The British Pound stands out as rarity among the major currencies, with prices driven by monetary policy expectations rather than risk sentiment, hinting that the release actually has market-moving potential. With that in mind, only an aggressive upward revision is likely to reignite near-term Bank of England rate hikes bets.Such an outcome seems unlikely however given the mixed tone of recent economic data. Indeed, a Credit Suisse gauge tracking investors' tightening expectations over the coming 12 months has been sliding precipitously since early April, hitting the lowest in five months today.

Risk appetite is back on the defensive, with European shares taking their cues from the selloff across Asian bourses in early trade. Stock index futures tracking the S&P 500 benchmark stock index are firmly in negative territory, pointing to more of the same as Wall Street enters the fray in the second half of the session. On balance, this promises continued gains of the safety-linked US Dollar against the majority of its top counterparts. The US Durable Goods Ordersreading promises to compound the risk-averse environment, with expectations calling for the largest monthly drop in six months.