Asian markets recovered for a third day as economic data from the US and Asia boosted confidence in the recovery process amid growing concerns on MENA region issues. The MSCI Asia Pacific index gained 0.9%, Nikkei rose 1%, Hang Seng remained largely unchanged, Shanghai Composite rose 0.5% and yesterday we saw the Dow climbing 0.8% and S&P 500 closing 0.55% up. Economic data such as positive Chinese manufacturing despite government efforts to control inflation levels, jobless rate in Japan remained unchanged at 4.9% while number of workers added improved, Australian retail sales gained 0.4%, more than forecast and the RBA kept interest rates unchanged at 4.75% while yesterday US personal income data showed an improvement although pending home sales and consumer spending rose less than forecast.
There are signs of risk-appetite coming back to markets as the Yen declined against most currencies backed by positive economic data which is keeping morale of investors positive amid growing tensions in the Middle East, giving strong signs of global market recovery. EURJPY traded higher for a second day at 113.50, EURUSD traded at 1.3830 holding on to its strong position on expectations that the ECB will show readiness to tackle rising inflation and hike rates faster than the Fed, USDJPY rose to trade at a high of 82.24, GBPUSD moved up to high of 1.6299 as manufacturing data may show improvements and as the BOE could take steps to control high inflation levels after oil keeps climbing, AUDUSD rose to 1.0202 as retail sales rose and RBA kept rates unchanged, USDCHF traded at 0.9322 highs and Gold remained stable at $1415.
We are seeing a contrast in policy measures with the ECB holding a hawkish policy stance, willing to increase rates faster than expectations to fight rising inflation levels as ECB's Draghi said that inflationary pressures are forcing policy makers to focus more on the timing of rate increases while the Fed holds a dovish policy as focus is more on job creation than inflation. The effect is seen in currencies as the Euro has climbed 1.3% this year while the Dollar has fallen 2.2%. We could continue to see Dollar weakness as economic data shows positivity with investments now shifting to riskier assets and Fed shows no signs of raising rates this year.
We have a busy calendar day ahead with Swiss GDP figures, UK house prices, mortgage approvals and manufacturing data, German manufacturing and unemployment data, EU manufacturing, unemployment and inflation estimate data, Bank of Canada holds interest rate decision while US releases manufacturing, construction spending data and Fed Chairman Bernanke testifies to the House Committee on the QE2 and stimulus measures.

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