httpvh://www.youtube.com/watch?v=L-9rZYOb730

·         British bank makes £11.6bn in 2009

·         UK inflation rises to 3.5%, highest in 14 months

·         Greece given 1 month to initiate austerity measures.

·         BoE minutes, UK unemployment, US industrial Production and Fed minutes due today

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Risky assets, including the euro, strengthened yesterday as investors took cheer from bank earnings and speculation of further austerity for the Greek economy.

The main news in markets were the profit figures posted by Barclay’s. Profit was nearly twice what most equity analysts had predicted coming in at £11.6bn. Their shares jumped accordingly dragging other banking shares and the FTSE 100 index accordingly higher.

The rise was not dented by the UK CPI release which saw inflation rise to a level of 3.5%, a 14 month high. I expect inflation will continue to rise in the UK over the coming months and that Mervyn King’s letter to Alistair Darling will not be his last in 2010. I think CPI will peak at around 4.2% before falling back as we move through the year. Sterling reacted positively but any gains will always be limited by pre-election jitters.

While the euro had its best day in recent weeks it started on a poor footing as German ZEW business sentiment continued to fall. Investors and businesses have reported falling confidence in Europe’s largest economy 3 months in a row now and I believe this will continue as the realisation of the Greek begins to dawn.

Which allows me to segue nicely into the latest news on the Greek bailout. Greece has apparently been given a one month window with which to persuade both members of the EU and the markets that its fiscal recovery plan are up to scratch so as to avoid collapse. The EU will consequently wait until March 16^th before it asks for more austerity measures.

Until then Greece will have to sit on the naughty step as reports swirl that until the state has left ‘receivership’ they will not be allowed to vote on EU measures. Humiliating for a state that invented democracy.

Sterling may come under pressure in today’s session with the Bank of England minutes the key piece of data. This is of course the meeting within which the vote was cast to ‘pause’ quantitative easing; it will not have been unanimous and therefore the margin is all important. 8-1 would be good for GBP, 5-4 would be bad. We also have the minutes from the Fed this evening but I doubt that they will deviate much from Ben Bernanke’s most recent public comments or testimonies to Congress. We round off the data with UK unemployment at 09.30 and US Industrial Production at 14.15.