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European finance ministers granted financial assistance to Portugal in the form of a EUR78bn loan as expected. It is to be repaid over the course of the next 3 years. The fact that they have this cash does not mean that Portugal will be absent from the debt markets over the next coming few years but we expect the yields on issues to stay elevated as the problem surrounding Greece rumbles on. In order to meet these obligations Portugal is expected to wipe out its huge deficit through tax rises and the sale of government assets.

The key data today is UK inflation due at 09.30. We saw a slight fall in CPI in march to 4% from 4.4% in February as fuel and food prices moderated lower however we expect this to be a one-off with today’s report expected to show a slight bounceback in the CPI to 4.1%. We would attribute this back to an invrease in those food and fuel costs. This higher reading obviously follows only a week from the Bank of England’s Quarterly Inflation Report that said a rise to 5% is likely in the coming months.

Today’s inflation reading is also due to trigger the exchange of letters between the Chancellor and Mervyn King to explain why inflation is above target and the answers will of course be the increases in food and fuel prices imported from abroad and not something the Bank of England can really combat.

The euro bounced higher in trade yesterday as the market got over the spice from the arrest of the IMF managing director although it has lost ground this morning after Eurogroup head Juncker stated that he would not exclude a Greek debt “reprofiling”. Now the difference between “restructuring” and a “reprofiling” is unclear but it seems that they are one and the same.

The UK CPI measure is the most important thing in the markets today but we also have German ZEW; a measure of investor economic sentiment that is expected to decline for a third consecutive month in May. US industrial production report is also expected to slow likely as the effects of the Japanese earthquake continue to effect.

Latest exchange rates at time of writing