There is risk and then there is euro risk.
And we are watching the first turn into the second this week.
Classic risk has dominated the market for some time as fears over a double dip recession in the U.S. have continued to hover and investors have preferred safe haven currencies, such as the dollar and the yen, at the cost of high-yielders, including the euro.
However, risk sentiment looked set to improve.
Not only did last Friday's U.S. employment data show signs of improvement but both the White House and the U.S. Federal Reserve finally appear ready to take the bull by the horns.
President Barack Obama has proposed $50 billion of infrastructure spending that will provide another fiscal injection for the country's spluttering recovery.
Also after weeks of hinting at it, Fed officials now look ready to provide another tranche of quantitative easing, the so-called QE2. In a speech on Tuesday, the Fed's former vice chairman Donald Kohn suggested that this is only a matter of time and analysts are now speculating that the move will come at the Fed's policy meeting in early November.
So far so good, safe havens should have lost their attraction and high-yielders, including the euro, should have been back in favor.
But, we have had a shift to euro-specific risk instead.
See how the euro will come back under pressure against the dollar:
http://www.dowjoneswebservices.com/chart/view/4564
Concern over the U.S. recovery has been replaced with concern over the euro zone recovery as well as the continued risk of sovereign debt default.
A sharp reminder of the economic difficulties facing the euro zone came over the last week as industrial activity and export orders, particularly in Germany, slowed sharply. This illustrated just how quickly the country's export driven recovery earlier this year will come to a shuddering halt, removing the one bright spot on the euro zone's economic landscape.
This immediately put the spotlight back on European banks, which appear to have underestimated their exposure to sovereign debt in stress tests conducted earlier this year.
Deteriorating growth prospects among the euro-zone's peripheral debtors have also raised the risks of a debt default as these countries struggle to meet their repayment obligations.
Over the last 24 hours, the cost of insuring against default in many of these countries has risen back to their recent highs or even beyond, as in the case of Ireland.