The euro strengthens mildly in early European session on positive growth data. French GDP rose 0.3% qoq in Q4, up from Q3's 0% qoq and beat expectation of 0.2% qoq. German Q4 GDP grew 0.4% qoq versus expectation of 0.3% qoq, up from prior quarter's 0.3% qoq. Eurozone will release regional GDP later today and is expected to show 0.3% qoq growth, up from prior 0.1% qoq. We might see a mild upside surprise there. Italy will also release Q4 GDP figures. Rally is EUR/USD is so far quite cautious as there are concerns that Q4's figure were just temporary strength and the economy would become weaker again in Q1. And, ECB is still favor much deflationary risk and could add stimulus in the latter part of the year. Nonetheless, technically, the EUR/USD's recent correction could have already finished at 1.3476 and we might see a break of 1.3739 resistance for retesting 1.3892 high in near term.
Released earlier today, China's headline CPI rose 2.5% yoy in January, following a similar increase in December. From a month ago, inflation rose 1%. Food prices grew 3.7% yoy, down from 4.1% yoy in December, while non-food inflation accelerated to 1.9% from 1.7% yoy in December. Meanwhile, PPI dropped -1.6% yoy in January, following falling -1.4% yoy in the previous 2 months. Going forward, credit tightening would result in a low inflation environment in coming months.
As a response to the Chinese data, the AUD/USD recovers further and was back above 0.9 level As noted before, while the AUD/USD tumbled yesterday after the poor job data, RBA has already made clear of its intention to keep rates unchanged for a period of time. Thus, weakness in the AUD/USD should be relatively limited. And so far, the pair is maintaining mild near term bullishness with 0.8906 support intact. We'd still favor another rally through 0.9085 resistance after current consolidation from 0.9066 finishes.
Look ahead, in US session, US will release import price index, industrial production and U of Michigan consumer sentiment. Canada will release manufacturing ships.