Problems within Spain, Greece and, to a lesser extent, Cyprus have been
prominent within the euro zone for a long period. Despite this, the nations
continue to suppress their cries for help in order to prevent further
debilitating austerity requirements that have already caused widespread riots.

Problems within Spain, Greece and, to a lesser extent, Cyprus have been
prominent within the euro zone for a long period. Despite this, the nations
continue to suppress their cries for help in order to prevent further
debilitating austerity requirements that have already caused widespread riots.

Yesterday however, troika rumours surfaced that next month all three
Mediterranean nations could receive the finances that would rebalance their
respective bond yields. Stocks rose on this news, although the euro traded
fairly flat after earlier gains from the news was offset by investor
recognition that any action is still in the distance.

Yesterday data showed the indication that Ben Bernanke’s much-criticised QE3
programme is now bearing fruit, as US retail sales increased by more than
expected. Coming in at 1.1%, it is the first time that the economy’s retail
sales have seen consecutive months above 1% for three years. The improving
economic picture is likely to result in greater risk appetite as investors
search for greater gains elsewhere.

The expected trend for short-term euro strength and dollar weakness is set
to continue, though it must be noted, the adrenalised charge of investors
between bullish fights or bearish flights can cause swings in and out of the
riskier currency.

Today the UK’s inflation rate is set to return closer to the Bank of
England’s two per cent target. This result may clear the way for looser
monetary policies going forward, as the MPC tries to propel the economy away
from stagnation.

Key Announcements
Today:

• 09.30am – GBP – CPI y/y: expected to lower towards the 2% target at 2.2%
• 10.00am – EUR – German Economic Sentiment: expected contraction
• 10.00am – EUR – CPI y/y: expected to remain constant at 2.7%
• Tentative – GBP – BOE Inflation Letter
• 13.30pm – USD – Core CPI m/m: marginal increase to 0.2%
• 14.15pm – USD – Industrial Production m/m: slight growth expected at 0.2%