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After yesterday’s snooze-fest we can finally tuck into some news flow with the UK’s latest CPI reading due at 09.30. We were worried yesterday that GBP could be in for a tough week and this inflation release represents the one thing that could reverse that. We looked for a similar boost from PPI a couple of weeks ago; it missed expectations however and sterling began this little wobble.

This poor PPI release, combined with the consequences of the problems in Japan and Libya, and the BOE Deputy Governor’s comments last week that were more dovish than recent communiqués has led to a softening of rate hike expectations. As you may recall, a fair few analysts brought their predictions forward to May after the most recent Inflation Report while we remain at August. Some have started to come back to us but the consensus still remains for the month after next. This is but one of the reasons for sterling’s recent malaise.

Risky assets were helped yesterday by some typical “Merger Monday” action as T-Mobile USA was bought by AT&T for $39bn and the news from Fukushima remained positive. The USD continued its recent poor run as a result with GBPUSD making a move above the 1.63 level towards new 3 week highs whilst EURUSD jumped to its highest level since November. This has kept GBPEUR at tricky levels, something we are looking for CPI to resolve today.

We of course have the Budget tomorrow from Chancellor Osborne and certain elements are starting to be leaked by the government to soften up the ground. It is expected that he will announce a reduction in the amount of tax to be paid by British companies on foreign profit, while tightening regulations and taxes on non-doms. There will also be new measures on tax avoidance particularly leveled at the wealthy. He stands at 12.00 and we will be live-blogging the announcements and their likely effects on Twitter tomorrow. You can follow us at @world_first

That UK inflation reading will be the main focus data wise today but we have two very important currency pairs (GBPUSD and EURUSD) coming in on long-term resistance to further upward movement. Today could be the day we see the US dollar bite back after it has been sold so heavily since the Japanese intervention last week.

Latest exchange rates at time of writing