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Pomp and circumstance greeted George Osborne and Mervyn King yesterday night as they both gave speeches to the Mansion House. While Osborne’s comments are grabbing the headlines (the break-up of the FSA and the newly committed stance of Hector Sants mainly) it is once again King’s that swayed the pound.

It appears we once again have a split in the MPC as to where interest rates should be heading in the coming year. Andrew Sentence was particularly hawkish in an article published in this week’s Sunday Times however Mervyn King seemed to be at the other end of the monetary policy spectrum. He commented that ‘some had become sceptical about the MPC’s commitment to achieving the inflation target’. He also said that policy should not be influenced by short term blips like oil price rises and reductions in VAT.

While this weighed on the pound it did not cause the massive drops that Mervyn King has become synonymous with in dealing rooms across the city.

Before we shifted our focus to the Mansion House however the focus was very much back on Europe. While their football team was being beaten by the Swiss the Spanish were refuting reports that an international credit line had been set up for the country. News out of Spain has been poor of late and this is only adding to the poisonous euro cocktail. Some cajas are reportedly still in trouble and any more bank rumblings will see the euro snap lower once again. There is a Spanish bond auction that will see a lot of market focus today; spreads of Spanish, Greek, Irish, Portuguese and Italian debt have all risen compared to that of Germany in recent days, a sign of once again growing unease in the eurozone.

Sterling was bucked higher by the news from the UK jobs market. The jobless claims figure fell by 31k people compared to the market consensus of 20k and the unemployment rate fell to 7.9% compared to 8% previously. Given unemployment normally lags the recovery these figures are encouraging. Sterling isn’t off to the races as a result however as the budget next week is in the back of everyone’s mind and with strike action being proposed by the unions this good will towards the pound may not last.

Today’s retail sales figure should be alright however which, if it is, should be able to quell King’s fears of falling consumer demand. That is due at 09.30. The data calendar is completed by the CBI’s industrial trends survey at 12.00, US CPI at 13.30 and US Philadelphia Fed Manufacturing at 15.00.