httpvh://www.youtube.com/watch?v=Y99HOQS4Zb0

Lawmakers stateside managed to get together and agree to keep the US government open late on Friday, narrowly avoiding a shutdown and the ire of many a voter. The dollar has remained weak however since then suggesting that it was not the prospect of a shutdown that damaged the greenback but instead something else, most probably the equity market bounce we saw in Asia and Europe on Friday after the Japanese aftershock turned out to be less serious than originally believed.

The market is still chewing over the details of the ECB’s rate rise and Portugal’s request for assistance that came last week. By all accounts requesting aid is all well and good but given the austerity measures that will be imposed are likely stricter than that of the government plan that was voted down in past months, Portugal is not getting off scot-free. This is central to our belief that the euro will start to tail off as soon as GBP positive data emerges.

The first chance is tomorrow with the March round of CPI published at 9am. Obviously global inflation pressures are not going anywhere with oil and other commodities continuing to post new near-term records and the markets expect UK inflation to remain at 4.4% in March; anything north of this should give sterling a boost. Friday’s factory gate inflation release was never going to be quiet either and should stand tomorrow’s number in good stead. If the UK can combine this rise with an increase in consumer prices and a good GDP figure towards the end of the month then we would expect the MPC to move closer to raising rates come their May meeting.

Today is fairly quiet datawise and kicks off a fairly smooth week as well. Highlights include inflation data from the UK tomorrow and from the EU on Friday and Wednesday’s UK unemployment and US retail sales.

Latest exchange rates at time of writing