Meanwhile, the recent theme lackluster data points from Europe’s flagship economy remained source of disappointment with German industrial production falling 0.3 percent in June, representing a decline of 0.9 percent annually. Economists’ had anticipated a rise of 0.3 percent and a 0.8 percent annual contraction.
Sterling rebounded after the Bank of England’s inflation report and ensuing press conference from Governor Mervyn King. While the report provided a fairly bleak economic assessment and lowered the growth outlook, comments by Governor King suggesting a rate cut would be counter-productive and would do little for the economy, gave Sterling the impetuous to forge higher. On further asset purchases, King noted, “there are measures that we can take in the future and further asset purchases will clearly be one of them. That's something we will look at each month as we come to it, but without prejudging what the appropriate response would be.”
Stability from both sides of the Atlantic kept the appeal of the Australian dollar in-tact which retraced yesterday’s losses to highs of 105.83 US cents.
The day ahead will see the focus shift to the prospect of further easing from the world’s second largest economy with the much anticipated Chinese CPI on the docket. In a sign the Chinese Government has ample breathing space to relax previous efforts to rein in inflation, consumer prices are expected to ease further in July to a yearly pace of 1.7 percent from 2.2 percent in June. A rise in easing expectations is likely to induce gains from currencies contingent on Chinese growth, with the Aussie dollar a prime beneficiary. Later in the afternoon, participants will also be watching closely data on industrial production, retail sales and fixed asset urban investment. Although mid-tier themes, we expect any significant deviation from estimates to provide direction for the local unit. Also in the frame today will be the latest employment print which is expected to see the Australian economy create 10,000 new jobs in July, while the official unemployment rate is tipped to edge higher from 5.2 to 5.3 percent.
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