Chinese inflation accelerated slower than forecast at 4.9% (exp. 5.4%) giving strength to high-yielding currencies and the Yen declined against majority of currencies. EURJPY rose to a high of 112.94 as Asian stocks rose, EURUSD rose for the first time in four days to a high of 1.3528 before reports expected to show economic-growth quickened and German investor confidence increased, AUDUSD rose to high of 1.0058 after the Chinese data and RBA policy considered that a restrictive stance was appropriate in keeping rates unchanged, USDJPY traded at high of 83.56 and GBPUSD rose to a high of 1.6063 on expectation that higher inflation report would add pressure on the BOE to increase rates in their next meeting.
Asian markets rose following the Chinese inflation reports and ahead of US reports expected to show retail sales grew 0.5% (prev. 0.6%) as MSCI Asia Pacific index rose 0.2%, Nikkei rose 0.2%, Shanghai Composite rose 0.3% while the Hang Seng dropped 0.7%. The Japanese stocks got a boost after the BOJ raised its economic assessment for the first time in nine months as faster overseas growth boosted exports and production adding that the economy is emerging from the current downward phase and continues to target a rate of 0% - 0.1% while keeping asset purchases unchanged.
Reports from the EU and Germany would show GDP grew 0.4% in EU (prev. 0.3%) and 0.5% in Germany (prev. 0.7%) while ZEW reports would show German investor confidence climbed to 20 (prev. 15.4) confirming that the economies are improving and combined with lower inflation from China, boosting risk sentiment in markets giving impetus to the Euro currency. The RBA said in its minutes that a slightly restrictive policy was appropriate as resources boom boosted income while the Aussie could see long-position as commodity currencies get a boost after inflationary risks were downplayed where China could see further interest rate hikes.
GDP figures from Germany and EU, ZEW investor confidence, UK inflation report, US advanced retail sales, empire manufacturing, Treasury income flows and NY Fed's Dudley speaking today would form today's economic calendar.