Economic data released in the UK showed the economy resumed growth in the fourth quarter, albeit less than expected. Although it represents an exit from a state of recession, growth of 0.1 per cent fell short of 0.4 per cent estimates, which represents an annual contraction of 3.2 per cent. Sterling plunged to lows of US$1.6090, exacerbated by the latest bout of risk aversion as concerns mount China's steps to cool economic growth may impact the world economies. This was the primary catalyst to for the fall of higher yielding key commodities - Inturn the greenback and the Yen become the beneficiaries.
By default the Aussie followed suit falling below 90 US cents in domestic trade to lows of 89.4 US cents overnight, representing 3 week lows. We are however seeing major counterparts regain some composure after US consumer confidence shifted investor sentiment, evident in some healthy gains in US equities throughout the session before tailing off at the closing bell.
US Consumer Confidence rose for the third consecutive month to a reading of 55.9 for the month of January, beating the 53.6 consensus. December's level was upwardly revised to 53.6; it was originally reported as 52.9.
The S&P / Case Shiller Home Price Index also showed further signs of a US housing recovery with a further improvement on the annual rates of decline. Novembers report showed the index fell 5.3 per cent against a previous fall of 7.3 per cent.
Movements on the local unit will be highly contingent to local inflation data due for released at 11:30 am which is expected to show fourth quarter growth of 0.4%, representing an annual inflation rate of 2 per cent. At the time of writing the Aussie is buying 89.9 US cents and expect it to add weight given a higher than expected CPI reading this morning as investors sway to a greater chance than not of a 25 bps rate hike in February.