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Welcome back everyone and I hope you all had a relaxing few days off.

The market is seeking to cram in as much as data and central bank notifications this week as possible with the main focus to be the FOMC press conference tomorrow night. We expect the FOMC to maintain its loose monetary policy language by keeping the phrase “rates will stay accommodative for an extended period of time”. We would suspect that this would lead to further gains for the carry trade with AUD, NZD and EUR likely to gain while low yielders should slip lower. This play is also likely to be helped by a resumption of US earnings season which has been broadly positive with 85% of companies beating earnings expectations on the EPS measure.

Stories around the European periphery have been thin on the ground over the weekend although 2 Greek newspapers said that the Greek government is considering an extension to the maturities of its sovereign debt which technically constitutes a default. It seems that the government is the only body in Greece that is not willing to acknowledge that a restructuring of debt is needed and large riots are planned for the May Day weekend. The CDS prices for the periphery have shrunk over the weekend, as have the yields on their respective bonds suggesting that the market is less worried about a possible credit event.

Here in the UK the focus is very much on tomorrow’s GDP release. This release is key to the future of the pound in 2011 and sets up whether when we will see an interest rate rise in the UK. After the contraction over the 4^th quarter the market is looking for a release of around 0.5%. Anything more is obviously good news and I think we would need to see a greater number to see some onward progression for the pound as a 0.5% release is more than likely a disappointment against the Bank of England’s growth projections. The pound is lower this morning.

Latest exchange rates at time of writing