Inflation made a comeback in December
The MI inflation gauge rose by 0.5% in December, which was the strongest increase since June 2016.
For the year to December, headline inflation increased by 1.8%, up from 1.5% in the year to November. It was the highest annual rate of inflation since February 2016.
The trimmed mean measure of inflation also increased by 0.5%.
For the year to December, the trimmed mean measure of inflation lifted by 1.4%, up from 1.1% in the year to November.
It was a quiet session with US markets closed due to Martin Luther King holiday.
Meanwhile European markets were relatively quiet, although there was a mild negative reaction to UK Prime Minister May's comments over the weekend.
Uncertainty over Trump's policies may have also weighed on appetite. The Euro Stoxx fell 0.9% and the FTSE100 dropped 0.2%.
The slight risk averse mood was supportive of bonds. Yields on 10-year German bunds fell 2 basis points 0.32%. Italian yields lifted slightly after Canadian ratings agency DBRS cut Italy's sovereign credit rating.
Australian bonds were very little changed yesterday and corresponding futures were also little changed overnight. Futures imply 3-year yields of 2.00% and 10-year yields of 2.73%.
The US dollar index edged slightly higher, but the key focus was GBP.
It temporarily dipped below 1.20 against the US dollar on hard brexit fears but then recovered to trade at 1.204 this morning.
Markets are awaiting a speech by PM May tonight which is expected to outline the government's plans for Brexit.
Weaker sentiment and the stronger US dollar saw the AUD weaken slightly to 74.7 US cents this morning.
Brent oil prices rose as Saudi Arabia pledged it will stick to its commitment to cut oil output. Gold prices rose on geopolitical concerns following Trump's comments on China, while copper prices weakened.
The euro zone trade surplus edged up from €19.9bn in October to €22.7bn in November, larger than the €20.8bn expected by median estimates.
Machine orders, a leading indicator of investment, were weaker than expected, falling by 5.1% in November. This was the fastest pace of decline in seven months.
For the year to November machine orders jumped 10.4%, rebounding from a decline of 5.6% in the year to November. Private sector machine orders increased 11.4% in November.
Producer prices rose by 0.6% in December, after increasing by 0.4% in November. For the year to December, producer prices fell by 1.2%, a lift from the decline of 2.2% in the year to November.
No data released due to Martin Luther King holiday.