Asian stocks rose as the US Fed said that it will continue supporting the economy, commodity prices soared and the South Korean Won rose. The MSCI Asia Pacific Index rose 0.6%, Nikkei rose 0.75%, Hang Seng rose 0.45% and the Shanghai Composite rose 1.4%. Asian markets are showing signs of growth on positive earnings reports and Fed's announcements while the PBoC said that interest rates would gradually increase in H1 2011. Japanese exports rose 13% while imports rose 10.6% giving boost to sentiments that global demand is picking up.
The EURUSD continued its rise to trade at a high of 1.3714 on speculation that German inflation levels rose at the fastest pace in two-years when the data releases today adding signs of positive recovery kicking in and on speculation that the ECB will reiterate today their concern that inflation will quicken, AUDUSD dropped after the PM announced a one-off tax levy on income to fund rebuilding after the recent floods with the currency trading at lows of 0.9937, USDJPY traded at low of 82.02, GBPUSD declined to 1.5897 as house prices declined the most in three years on economic outlook concerns.
Yesterday's FOMC statements said that expansion in the US is continuing, though at a rate which is insufficient to bring significant changes in the labor market, inflation is too low, unemployment is too high and said that the progress towards its objectives have been very slow while keeping interest rates unchanged at 0.25% and maintaining plans to purchase $600 Billion of treasuries till June. There are speculations that the Fed will keep rates unchanged all of this year before raising in Q1 2012. German inflation probably increased to 2.2%, highest since Oct. 2008 while consumer sentiment increased to 106.7 according to reports due today while ECB President Trichet said that the ECB will do everything that is necessary to keep inflation in check giving rise to speculations of a rate hike in the docks. The BOE minutes revealed that another member voted for increasing interest rates by 0.25% g iving hawkish tone for the policy while some had concerns over the inflation levels and one member voting to add another 50 Billion Pounds to the asset purchase program which gave some strength to the GBPUSD.
The Australian PM said that the nation's flood crisis would cost $5.58 Billion and erase 0.5% of the GDP while adding that an additional tax levy from 0.5% - 1% would be added to income earners raising A$1.8 Billion to help raise money for rebuilding while the RBNZ kept interest rates unchanged at 3% adding that tightening concerns are still in place and indicated that the next rise could be in June.
We expect German inflation news, EU consumer and business sentiment data, US durable goods orders, jobless claims, pending home sales while tomorrow's focus would be on GDP estimates.