By Eric Andersen, THETAKEAWAY : Chinese inflationunexpectedly accelerated in December > AUD, NZD dip slightly onlowered Chinese rate cut bets > Impact fades quickly as Eurozoneissues stay in focus Chinese inflation accelerated last monthaccording to data released by the China Economic InformationNetwork. The Consumer Price Index rose at an annual rate of 4.5 percent inJanuary and the Producer Price Index rose 0.7 percent over the sameperiod. This is the first time that inflation levels have increasedsince June 2011. While PPI was slightly lower than forecast, CPI rose much higher than the market expected. Price levels rose 4.1 percent in December and analysts were looking for a slowdown to 4.0 percent this month. Despite the large contrast to expectations, the data’s effect on price action was relatively muted. The Australian and New Zealand Dollars saw slight drops in the moments after the report was released as traders pared back hopes of further Chinese rate cuts, but both have since recovered. Presumably, traders are reserving judgment for now pending the results of today’s meeting between EU finance ministers and Greek leaders in Brussels as officials continue to haggle over the debt-strapped country’s second bailout package. The latest discussions are reportedly marred by disagreement regarding cuts to Greek pension plans. The ECB monetary policy announcement due later today likewise marks an important inflection point for market-wide sentiment trends.
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