EU session review: Euro rises as inflation quickens to two-year high; Kiwi slides on permits

Data released:
07:00     Germany     Retail sales (December) real adjusted    -0.3%    2.0%    -2.4%
07:00     Germany     Retail sales (December) real unadjusted Y/Y    -1.3%    -    2.0%
10:00     EU(17)     Harmonized CPI (January) Y/Y preliminary    2.4%    2.5%    2.2%

The euro strengthened after a report showed inflation in the region accelerated to a two-year high this month, signaling policy makers may be moving closer to raising interest rates.
The single currency gained for the sixth time in the past seven days against the dollar. Inflation quickened to 2.4% from 2.2% in December, the European Union’s statistics office said today. That’s the fastest since October 2008.
The consumer-price report “underlines the ECB’s concern on inflation and will further contribute to the internal debate about what the appropriate response should be from the central bank,” said Michael Derks, chief strategist at FxPro Financial. Their concerns “are unlikely to go away in the short term, given the most recent performance of commodity prices, so they may well be one of the first major central banks to hike rates.”
New Zealand’s dollar weakened after a report showed home- building approvals fell to a 23-month low in December.
The New Zealand dollar depreciated. Home-building permits declined 19% from November to 1,018, the lowest level since January 2009, Statistics New Zealand said today. Excluding apartments, approvals fell a sixth month, dropping 11%.
The Australian dollar traded near a its lowest in more than eight weeks against the yen as Asian stocks declined on concern the unrest in Egypt will spread, damping demand for higher-yielding assets.
Australia’s currency slipped versus the yen as its central bank said loans provided by the nation’s banks and finance companies rose 0.2% in December from the previous month, compared with the median estimate for a 0.3% gain.
A monthly gauge of Australia’s inflation accelerated in January as floods in the nation’s northeast drove up the cost of fruit, vegetables and utilities, according to an index compiled by TD Securities Ltd. and the Melbourne Institute released today. Consumer prices increased 0.4% after advancing 0.2% in December. They rose 3.4% in January from a year earlier, the fifth consecutive month above the top of the Reserve Bank of Australia’s inflation target band.
“The RBA board tomorrow is expected to discuss and evaluate the outlook for inflation in the wake of widespread flood damage,” Annette Beacher at TD Securities wrote. “We remain of the view that the RBA are on the sidelines for several months, but expect the resumption of tightening from May.”

EUR/USD rose from lows around $1.3570 to $1.3775 after triggering some resistance and stops.

GBP/USD followed euro's rise, recovering from $1.5830 to $1.5913.

USD/JPY printed lows below Y82.00 before it was back to Y82.30 and set stable around there.

US data starts at 1330GMT with Personal Income & Expenditures, PCE data as well as the ISM-NY Business Index. Personal income is expected to increase by 0.4% in December.
US data continues at 1445GMT with the Chicago PMI, which is expected to fall to a reading of 65.0 in January from the revised 66.8 December reading.