AUS TDMI Inflation Guage Sees Easing In Annual Rate

Annual inflation in Australia continued to ease in December, slowing to a growth rate of 2.2%. Annual inflation was running as high as 4.8% in June. On the month prices were down 0.2% following a 0.6% decline in November. Slower inflation is a sign that the Australian economy faces its first recession since 1991, as GDP grew at its weakest pace in 8 years in the third quarter and incoming data will pressure the RBA to continue its rate cutting campaign.

JPN Industrial Production Numbers Worse in November Than First Estimated

In Japan, the final version for November's industrial production showed output plunging 8.5%, compared to the 8.1% seen in the preliminary estimate. It was the sharpest decrease in industrial production since February 1953. On the year production was down 16.6%.

AUD/JPY - Aussie Slides as European Session Increases Risk Aversion

Stocks in Japan were up to open the week amid optimism about the incoming US administration. The Aussie-Yen pair reached a high near 62.15 in the Asian session, but then risk aversion increased in Europe as European stocks fell bringing the pair down 180 pips in the Yen favor.

SWZ Retail Sales Turn Negative

Swiss retail sales fell into negative territory in November when adjusted for inflation, though they were still 2.5% higher when also adjusted for the number of shopping days. Still, the result points to a significant reduction in spending on components such as personal goods, food, clothing and shoes.

UK Rightmove House Price Data Shows Continuing Decline

In the UK, housing prices fell another 1.9% in January, the Rightmove agency said. On the year, average asking prices were down 7.3%. The report did show that there was a lack of new homes being put on the market which should help align prices more closely with today's restricted demand.

GBP/USD - Pound Falters as New Measures Taken to Stem Financial Losses

There was bigger news from the UK as the government expanded its plan to rescue the nation's troubled financial sector. The Bank of England was given powers to guarantee additional billions in bank debt and provide insurance against further rounds of losses on risk assets. The news hurt the Pound, as a need for a second bank bailout weighed on investor sentiments. The Pound-Dollar pair, after hitting 1.49 to start the week, tumbled 450 pips to 1.4450. That low was near support from last week.

GBP/JPY - Pound Suffers as Financial System Needs Further Bailout

The Pound-Yen pair also saw a very steep fall, with the change from high to low amounting to 500 pips. Stocks in London were down, especially following a warning by the Royal Bank of Scotland that it would post a $41.6 billion loss, forcing the UK government to increase its stake in the company. The increased pessimism in equities and risk sentiment was very clear in this pair.

EUR/USD - Euro Slides Sharply on Risk Aversion Theme

The Euro-Dollar pair reversed course from Friday, and fell in favor of the Dollar today. From a high near 1.3385, the pair dipped about 250 pips to find support at 1.3120. That move is consistent with the trend seen last week, when the Dollar was gaining on weakness in the Euro. With governments around the world taking new steps to try and shore up the ailing financial system, risk aversion was the main theme to start the week.

USD/JPY - Dollar Falls vs Yen Overnight, Bounces From Support at 90.15

The US stock market was closed today for the MLK Day, but the Dollar-Yen pair did see a slight bounce in NY trading following a fall about 100 pips overnight. New support has been established at the 90.20 area going back to Friday's price action.

CAN Foreigners Sell C$4.3B of Canadian Securities

In Canada, non-residents cut a sizeable C$4.3 billion of Canadian securities from their holdings in November. Foreign holdings of Canadian shares were reduced as stock prices retreated 33% over the past three months. In addition, non-residents significantly adjusted their portfolio of Canadian debt instruments in favor of more liquid short-term assets.

USD/CAD - Greenback Bounces off Support vs Loonie

The US Dollar-Canadian Dollar pair increased in favor of the greenback, adhering to its recent line of support. Resistance from Friday held at 1.2570. The Loonie was pressured by a drop in oil prices, which came down almost $2 to $34.65.

Upcoming Releases

Tonight's releases include New Zealand consumer prices for the 4th quarter and food prices. Japan posts its tertiary industry activity index, and a report on household confidence. Overnight, the UK will reveal its consumer and retail prices.

Continuing overnight, Germany and the Euro-zone will unveil their ZEW economic sentiment readings for January. Tomorrow, Canada will post data on manufacturing shipments and the Bank of Canada will decide on interest rates, where expectations are for a 50 basis point cut. Also, tomorrow sees the swearing in of the new President of the United States.