Encouraging economic data out of China today gave a much needed psychological lift to a market looking for any pockets of optimism. The 9.5% print on GDP was marginally above forecast, and significantly above the rumoured 9% figure which had earlier dragged risk assets off their session highs. Industrial production at 15.1% was a solid reading (versus 13.2% forecast), and Retail Sales numbers also showed some vigour coming in at 17.7%. All in all it was a pleasing set of data.

In currency markets, the AUD moved immediately one third of a cent higher (from 1.0585 to 1.0625) in reaction to the Chinese figures. Elsewhere the Euro pushed a quarter of a cent higher against the USD to move back past 1.40. Euro had broken through 1.40 in the previous trading session, however the Moody's news on Ireland created market blues as risk assets gave up the gains they had earlier accumulated.

Morning trading

Earlier today, the AUD suffered a minor setback with the lowest Consumer Sentiment reading in two years, however this result came as no great surprise in light of recent events.

Looking ahead to tonight, we are expecting to hear comments from Fed Chairman Ben Bernanke, which may or may not shape attitude to risk tonight, depending upon whether we hear any more negative rumblings from the Eurozone. If we see markets begin to stabilise a little and the Volatility Index to ease off, the AUD could draw support from the Gold price which is once again approaching all time highs.

FromTim Waterer (Senior FX Dealer, CMC Markets)