Talk of Greece 3.0, Chinese CPI Rebounds

Calm trading due to Easter Monday in Europe likely to continue; Chinese CPI jumped back to 3.6% from 3.2% due to food prices soar; 3rd Greek bailout; week's key events. Market turns to Canadian business outlook, Bernanke and Posen speeches. Bernanke & Posen on tap later in the evening. Thursday's Premium Intermarket Insights remain in progress. See below for more detail on those trades.

The greenback strengthened across the board in early Asia but later gave up most of its gains. Since the London session started, the buck has been trading within a narrow range as most European markets are closed in observance of Easter Monday. The USD is only stronger against the CAD as it trades around 0.9984.

This week started with Chinese CPI that in March jumped 3.6% from 3.2% on annual basis which was above market expectations of 3.4%. The increase is largely attributed to continued food inflation that soared 7.5% y/y. This result complicates policy decision as an interest rate cut and even RRR cut seem unlikely at the moment. The focus will now shift to Chinese trade balance tomorrow and GDP that is due on Thursday night.

Resurfacing reports of a third Greek bailout and intensifying worries about the Spanish economy might keep the common currency under pressure in the days ahead. An article in Sunday Times that Greece accepted that it needs to cut additional EUR 12 bln in order to avoid a 3rd bailout is not likely to calm the markets. Greek PM Papademos' comments that Greece will return to growth in second half of 2013 seem like wishful thinking.

Key events for this week are Beige book and Australian labor market data on Wednesday; PPI, US and Canadian trade balance on Thursday; CPI and consumer sentiment on Friday morning and finally FED chairman Bernanke's speech on Friday afternoon.

The only report for today's US session will be Canadian business outlook survey that is due at 10:30 am ET.

At 7:15 pm ET, FED chairman Bernanke delivers a speech on financial stability at the Stone mountain conference, followed by 7:30 pm when BOE MPC member Adam Posen speaks at the Williams College in Massachusetts.

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