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It was the eurozone which had the markets excited yesterday, it began when inflation in the eurozone jumped more than expected to 2.6% in March. This gave strength to the ECB’s case for increasing rates next week as it has no doubted fuelled concern that prices are being driven higher by underlying cost pressure and higher energy and commodity prices. The likelihood is that the ECB will raise its main interest rate by a quarter of a percentage point next Thursday. On another note, Germany’s unemployment level fell twice as sharply as expected in March which confirmed the steadily recovery of the jobs market.

The results of the Irish banking stress tests were pretty shocking yesterday, with the Irish Central Bank saying the tests show lenders will need to raise 24 billion euros in extra capital. This would enable the Irish banking system to withstand any possible losses if the economy worsens. The banks would have to maintain a minimum capital ratio of 6%, to name a few; BOI needs 5.2B euros of new capital, Irish Life needs 4bn and AIB needs 13.3 billion. Meanwhile, Portugal is not having much fun, as revised figures on Thursday showed the country’s deficit was more than a percentage point above target at 8.6% of GDP.

You would think that this would push sterling euro back up but in fact the opposite has happened, even positive house price data couldn’t save the pressured monstrosity that is sterling at the moment thanks to the EU interest rate suspense.

In the lead up the Nonfarm payrolls this afternoon we saw a surprise slip in US factory orders yesterday after demands for military aircrafts and other transportation equipment fell. New orders for manufactured goods fell 0.1% in February to 446bn which was the first fall since October and certainly missed economists’ expectations of a 0.5% rise. Also in the US, initial jobless claims fell by 6,000 to 388,000 for the week ending in March 26^th and although it was predicted the number would fall to 380,000 a fall is still good news.

The ones to watch today include the EU and UK PMI Manufacturing and the EU unemployment rate at 10am. This is followed by the eagerly awaited US No farm payrolls and unemployment rate this afternoon.

Latest exchange rates at time of writing