Solid economic data paved the way higher for risk currencies overnight following on from yesterdays outperforming Chinese Gross Domestic Product. Growth in China moderated to an annual pace of 8.9 percent in December, beating consensus estimates of 8.7 percent growth. If nothing else, this simply shows Chinese growth is not falling off a cliff, thus simmering the 'hard-landing' argument.
The Euro region was also able to muster some inspiration with better-than-anticipated Zew investor sentiment data and well-attended auctions. Demand for European debt also remained a positive driver with an Auction of Spanish debt seeing decidedly lower yields than last month's sale. The European Financial Stability Facility also remained a market driver overnight but this time for the right reasons. Despite being downgraded earlier this week by ratings agency Standard & Poor's, it seems demand for EFSF debt remains well-regarded despite the downgrade with strong Auction results overnight. Euro-Zone consumer prices moderated in December to record annual growth of 2.7 percent from a previous 3 percent. Economists anticipated 2.8 percent growth on year.
As one would expect the Euro was able to ride the wave of positivity with price action making a break to the upside of $US1.27. Gains were also recorded against major counterparts with the exception of the in-form Aussie dollar which received a significant boost yesterday courtesy of our largest trading partner, China. The Aussie went on to forge new highs against both the Euro and Sterling.
The local unit ran out of steam at 104.50 overnight before pairing gains over the latter half of U.S trade coinciding with U.S equities which pared gains after lackluster earnings by banking heavyweight citigroup. Nevertheless, US equities were able to squeeze out some gains by the close with the S&P and DOW gaining 0.35 and 0.50 percent respectively. We expect the resistant behavior at overnight highs to continue to play out with 104.5 a critical test for further upside. At the time of writing the Aussie dollar is buying 103.8 US cents.