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News yesterday delivered a gentle reminder that despite recent economic indicators suggesting ‘green shoots’ are appearing, there may still be further pain to come.

The pound suffered against its major partners after a sombre inflation report from the Bank of England (BoE). The report showed that the Bank still holds a cautious stance towards the UK economy and lowered growth projections for the year to negative 4.5%, making further mockery of the treasuries pre budget projections of a 3.5% contraction for the year.

Inflation was projected to stay below 0.5% for 2009 and not likely to meet the 2% targets until 2012, indicating that interest rates will be keep low for quite some while yet, and no further increase in QE is likely. Mervyn King stated that looking forward, the economic outcomes were “unusually uncertain”, and was keen to stress that the projections were just that, (having been embarrassed by the inaccuracies in past assessments).

US retail sales figures helped the pound to regain some composure against the dollar in the afternoon, as they showed that US consumers are still keeping their wallets at home with sales shedding 0.4% since last month, against a consensus forecast of no deviation. This helped US and UK equity indices down roughly 2% as investors sold off retail stocks and took profit

Meanwhile from the Euro zone, industrial production figures revealed activity is continuing to plunge, down 20% on a year on year basis. The figure returned euro zone industrial output back to 1997 levels.

Looking ahead for the day the major piece of news is the ECB monthly bulletin, but the Spanish preliminary GDP will set up Fridays Euro Zone GDP reading. The US provides us with initial jobless claims

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All this and more is available on our video blog at http://uk.youtube.com/user/WorldFirstJC