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The Bank of England left interest rates at 0.5% yesterday for the 24th month in a row as everyone thought would be the case. The morning began with a 10% probability of a hike and hence sterling slipped in the afternoon once the “No Change” decision was made public. We expect the Bank of England to also sit on its hands in April and wait until the details of the May Inflation Report are available before taking their next step higher. Most of the economist crowd have now moved their predictions to May but I am standing firm on August on the basis that government cuts hurt the UK economy more than expected and growth slows in May. I am quite happy to be proved wrong on this of course.

Today’s inflation figures are only likely to pour fuel on the fire of those inflation worries. Those who attended my webinar yesterday will have seen the correlation between producer input prices and the oil/copper price and will know that a jump higher is a foregone conclusion. The figure is due at 09.30 and is expected at 0.6%

Today, in two different parts of the world, are two very different days. In Saudi Arabia, Oman, Bahrain and Qatar today signifies the much anticipated “Day of Rage”. These will of course be covered extensively by the media and the more violent the clashes become, the bigger impact there will be on oil and the stronger the euro will become.

The second is actually in the Eurozone with an extraordinary meeting of EU finance ministers due to focus on the debt  and deficit problems of its member states. This comes only a day after Spanish debt was downgraded by Moody’s and this has weighed on the euro overnight. Topics on the table will include a Competitiveness pact and changes to the European Financial Stability Fund. We do not see any movement on these issues until the Heads of State sit down on March 24^th and 25^th and therefore we think the euro should trickle lower.

In the past hour we have all seen the impact of a major earthquake off the coast of Japan with tsunami warnings subsequently extended to no less than 50 countries along the Pacific Rim. The yen initially weakened by 0.6% vs the dollar and a 0.5% against the pound before rebounding back. The Kobe earthquake didn’t affect the yen too much to be honest. That earthquake, which was the most destructive since 1923, hit on Jan 17 1995. On the day USD/JPY opened at 98.40 and closed at 99.0. The peak in the next week was 100.20. That was the extent of yen losses. Our thoughts are of course, first and foremost, with those affected and we wish them every care and safety.

It seems mawkish to be focused on data while such events are taking place elsewhere but we have to. US retail sales are expected to surge on petrol and vehicle sales and the median estimate is for a 1% gain. Consumer confidence is expected to fall however on these price increases so the net result may be dollar neutral.

 Latest exchange rates at time of writing