Consumer prices were unchanged in Q4, lower than expectations of +0.2%. Yet, the market is now forecasting less of a chance for a rate cut next month. Why? If we dig down into the numbers we can see that both trimmed mean and weighted median estimates were lower than the main figure, putting them both in the top half of the RBA's target range of 2-3%. This could blur the line between a clear cut decision and more ambiguous data being the deciding factor for the RBA.

However, even if we take out the large slide in food prices, which accounts for 16.8% of the index, there is still a significant amount of evidence pointing towards another rate cut by the RBA. Firstly, the bank has previously made it fairly obvious that any decision will be influenced heavily by conditions offshore. So, given the weak outlook for global growth this year - the IMF is forecasting the global economy to grow at 3.3%, just 0.3% off recession territory - circumstances in the rest of the world could continue to hamper domestic growth.

Furthermore, there has been a steady flow of slow economic data out of Australia recently which points towards an economy that is feeling the effects of the European debt crisis. Earlier today, the MI Leading Index print was below estimated at -0.2% m/m, which suggests that the Australian economy is going to shrink next month.

Following the release of the inflation data, traders would lead us to believe that the likelihood of the RBA making it three in a row is fairly slim, highlighted by the spike in the aussie immediately following the inflation data. AUD/USD initially shot up by around 37 pips and continued to rise, before finding some resistance around 1.0570.

Trade figures out of Japan showed that exports slid by 8.0% y/y and imports increased 8.1% y/y, eroding the trade surplus and leading to a deficit of JPY 2.49 trillion. The country's trade balance is being hit from all sides; exports continue to be hammered by a high local currency and weak levels of global demand, whilst imports are being bolstered by reconstruction demand stemming from last year's devastating earthquake. When we add this together we can see why Japan is now in deficit territory for the first time in 30 years.

However, there is light at the end of the tunnel for officials in Tokyo. It is true that Japan's population is in decline and the domestic economy is shrinking, which should limit local demand, but this leads Japanese companies to look elsewhere for demand and subsequently brings profits home. This could feed back into the economy in later years, thereby turning the trade deficit back into a surplus.

In other news, credit card spending in New Zealand increased 5.9% during 2011. The headline figure was bolstered by a jump of 0.9% during December, much higher than the prior month. NZD/USD was driven around 13 pips higher on the back of the data, pushing it above 0.8100.

Attention will now be on the Feb and the release of the MPC meeting minutes in the UK.