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Trade was light yesterday across all markets as traders seem to have positioned themselves for the upcoming quarter and those that haven’t are waiting for upcoming data to justify feelings. They’ll get the chance with the inflation data due at 09.30. CPI is the most closely watched off the inflation measures as it’s what the BOE are targeted against, not that that has meant much recently. It seems unlikely that the CPI figure will fall back below 4.4%, although some market participants are suggesting that the VAT increase may have been delayed until February’s numbers.

We’re looking for 4.3% and an wobble in GBP from the number and obviously this has a huge amount of bearing on the monetary policy outlook in the UK. The curve has started to slip in favour of our Autumn rate rise prediction in recent weeks as austerity measures continue to concern analysts however a weak price figure now and good Q1 GDP at the end of the month would almost guarantee a rate pause past May.

Someone who has been critical of our inflation levels has been the IMF who released their latest set of growth predictions yesterday afternoon. While they kept their global predictions as they were in November with worldwide GDP expected at 4.4% in 2011 there were downgrades for the UK, New Zealand and Japan. On the UK they commented that the austerity measures, while necessary, would have a negative effect on growth going forward whilst New Zealand and Japan are of course saddled with the destruction and repair costs to their respective earthquakes.

Overnight there has been another large earthquake in Japan whilst the authorities at Fukushima have upgraded the situation to a ‘7’; the worst possible nuclear disaster and on a par with Chernobyl. This has put Asian markets lower overnight, strengthened the yen and hit the Aussie and Kiwi dollars hardest overnight. GBP has also fallen overnight after BRC shop price figures showed that the UK consumer just did not spend money in March.

Apart from the CPI figure we also have German ZEW at 10.00 which is set to slip on peripheral fears while US import prices will likely show that the weak dollar and recent uptick in commodities means inflation is coming.

Latest exchange rates at time of writing