Multiple factors weighed on markets this week, including European sovereign debt concerns, developing economies including China and Brazil initiating their liquidity exit strategies, and U.S. political issues such as Fed Chairman Ben Bernanke’s reappointment vote and proposed banking regulations which could slow the recovery even further. Risky trades lost favour, including commodities, and the VIX volatility index spiked back toward the 30 level.

Australia’s Treasurer Swan discussed a “resource tax” on mining revenues, as high as 40%. January Westpac consumer confidence surged 5.6% m/m and DEWR skilled vacancies improved 1.1%. December motor vehicle sales rose 3.3% m/m, 17.2% y/y, and the TD Securities inflation gauge rose 0.3% m/m, 2.6% y/y. AUD/USD fell almost from the opening with a brief pause midweek for profit taking, losing 1.8% in the week and closing at 0.9006.

U.S. December PPI printed 0.2% m/m, 4.4% y/y, and 0.9% y/y ex-food and energy. December housing starts were weaker than expected at 557K, weekly initial jobless claims were worse than expected at 482K, Department of Energy crude oil usage was lower than during the height of the recession, weekly consumer confidence wasn’t much better, and November TIC flows showed fewer Chinese government purchases of U.S. federal debt.

Eurozone January PMIs printed 52.0 manufacturing, 52.3 services, and 53.6 composite, as the overall ZEW survey fell slightly to 46.4. The German ZEW was mixed, a lower 47.2 for economic sentiment and improved −56.6 for current situation. EUR/USD lost 1.7% in the week and broke beneath its MA-200 as traders opted for U.S. problems over European ones, falling to close at 1.4140.

U.K. December retail sales improved 0.3% m/m, 2.1% y/y, less than expected. The economy lost −15.2K jobs in December, more than expected, although the claimant count rate held at 5.0% and the ILO rate improved to 7.8%. December CPI printed strong, 0.6% m/m, 2.9% y/y, and 2.8% y/y core. GBP/USD started the week strongly, rising as high as 1.6456, before falling to close at 1.6111. EUR/GBP rebounded midweek from support at 0.8650 to close at 0.8774, still beneath its MA-200.

The BoC left rates steady at 0.25%, as expected, with a slightly more upbeat analysis. November retail sales fell −0.3% m/m, flat ex-autos, and December CPI printed −0.3% m/m, 1.3% y/y, and 1.5% y/y core. USD/CAD surged 2.7% in the week, touching resistance at 1.0600 before closing at 1.0577. AUD/CAD consolidated between 0.9470 and 0.9555, closing at 0.9525.

New Zealand’s 4Q2009 CPI printed −0.2% q/q, 2.0% y/y, with December food prices down −0.3% m/m. November retail sales rose 0.8% m/m, same ex-autos, and the December business PMI improved to 52.9. NZD depreciated against all 16 of the major trading currencies, with NZD/USD losing 3.3% straight down to close at 0.7104. AUD/NZD rose above its MA-200, closing at 1.2668.

Japan’s December consumer confidence drifted lower to 37.9, 37.6 households. The yen gained against all 16 of the major traded currencies. USD/JPY spiked as high as 91.86 before falling to close at 89.85. EUR/JPY lost 2.8%, falling through support at 130.60 to close at 127.06, and AUD/JPY lost 2.5% and closed at 80.92.