The markets remained mostly optimistic this week despite a few hiccups. Japan’s fourth quarter GDP for 2015 showed a contraction of -0.40% while falling -1.40% on an annualized basis. The Yen remained stronger for the most part, but the strong risk aversion sentiment was showing signs of easing. Expectations are starting to build for the BoJ to act with further QQE expansion at the monetary policy meeting in March.

China’s inflation data released during the week came out broadly better in comparison to previous month’s weak prints. CPI edged higher in January, rising 1.80% but missed estimates of 1.90%. However, the markets took the data in their stride as China’s inflation jumped from 1.60% previously.

GBP: Focus on UK/EU negotiations

In the UK, consumer inflation was mostly flat. Core CPI in the UK increased 1.20% compared to the previous year while the headline CPI showed a modest increase of 0.30% matching estimates. The monthly unemployment data from the UK showed that average earnings were starting to pick up, rising 1.90%, while the unemployment rate remained steady at 5.10%, missing estimates of a dip to 5.0%. Later on Friday, UK’s retail sales data showed a larger than expected increase. Core retail sales jumped 2.30% for the month while rising 5.0% for the year while the headline retail sales was up 2.30% for the month and 5.20% for the year.

The British Pound, however, eased back after the release as the Sterling shifted attention to the ongoing UK-EU negotiations which are likely to continue into the weekend. At the time of writing, GBPUSD is down -1.41% for the week, trading at $1.425.

AUD: Suppressed by weak unemployment and dovish comments from RBA

The Australian dollar came under pressure this week as the monthly unemployment data showed a surprise increase in the unemployment rate. After staying steady at 5.80% since November 2015, the unemployment rate in Australia jumped to 6.0% in January alongside a contraction in the job growth. Although the Aussie’s reaction was limited, earlier on Friday, RBA economist John Edwards noted that he preferred to see the A$ at $0.65 as the current price did not reflect the decline in commodity prices. He, however, noted that the downside risks in the AUD were limited.