The Australian Dollar rallied through USD 1.0400 overnight following the Chinese GDP results, but has since met resistance and is back to yesterday’s levels.

Australia: Risk has been in favour again after the better-than-expected Chinese GDP figures yesterday. The result was an expansion of 2.0% in Q4 and a 8.9% reading for the year (against forecasts of 8.7%) and it came as a relief to the markets where good news is very welcome. Talk now is turning towards the Chinese authorities deciding to ease the reserve requirement ratio or look to expansionary fiscal policy as growth is officially at a 2 year low. Economic data out of Germany and the US was robust and importantly, for confidence, European bond auctions were successful. Gold has rallied as have base metals with copper over USD 8k per tonne. Today in Australia we see the January consumer confidence data released as well as December motor vehicle sales. We see the AUD holding at current levels as it assesses another potential move higher over coming days.

Majors: Good data has led to sentiment being boosted and this has supported a rally in equities, risk currencies and commodities. An important and successful Spanish and EFSF bond auction helped considerably, despite ongoing concerns over European debt problems and worse than expected profit results out of the US financial sector. China’s GDP result has been judged as good news, and retail sales surprised on the upside, though this could be due to an early Chinese New Year. In the US, the New York Fed’s Empire State manufacturing index read at 13.48 in January which is well above 8.19 in December and the German investor expectations measure rose sharply which bolstered sentiment in the beleaguered Euro Zone. Tonight, US industrial production and PPI for December, and the NAHB Housing Market index for January are released, while in the UK we have wages and employment data.

Economic Calendar
18 JAN AU Westpac Consumer Confidence JAN
UK ULO Unemployment Rate NOV
US PPI DEC
US Industrial Production DEC