A Chinese stock market slump of more than 5% gave the dollar a boost yesterday as risk was also heightened by the price of gold falling by 2% and oil declining on US inventory data.

Worries over the global economy were also increased by news that the 2 largest Chinese Banks would impose limits on how much they would lend this year. Should they abide these targets than roughly 80% has already been lent out; this obviously raises questions over growth, inflation and monetary policy in China.

The path for today’s trade may already be laid from the Asian session with the Chinese market’s performance vital; a strong session, a reversal of yesterday’s malady will allow risky assets room to breathe. At the time of writing the Chinese Composite Index is higher by around 0.9% and FTSE futures are showing a higher open by around 1%.

Euro weakened by over a cent against sterling yesterday and by over 2 cents against the dollar as inflation data from Germany showed many of the contingent states were suffering from deflation. This included the centre of industry and most populous state North-Rhine Westphalia, the European CPI release is due tomorrow and naturally we believe will be effected negatively by this data.

Today’s data calendar is quiet. Japanese Industrial production has already been published with the figure growing for the fourth month in a row. German unemployment is also due and could hurt the euro further.

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