Bank of England and European Central Bank interest rate decisions today

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Portugal's request for a formal bailout from the European Union and IMF came as no surprise yesterday after the €1billion auction of Portuguese debt was completed at punitive interest rates. The amount of the bailout seems set to be close to those of Greece and Ireland, with up to €80 billion being requested and is the second time in the last 30 years that the country has had to seek help (1983 was the last time).

There will be those that draw parallels with Spain, given the boom in property markets and support to the economy that tourism brings, but the Spanish economy has greater industry diversity and a broader tax base. That is not to say they can breathe easy, especially with the strong links between Spanish banks and Portuguese businesses, and the ongoing problems in Spain's property market and concerns over its deficit reduction plans. The effects on the markets of the Portugal news will be limited, mainly because it was only a matter of when they applied for IMF help.

On the data front, GDP growth from the Eurozone was confirmed at 0.3% for Q4 whilst the NIESR estimated that UK GDP growth for Q1 2011 will hit 0.7%, turning around quite significantly the -0.5% dip in GDP growth in Q4 2010.

Things are still tough on the UK high-street however with the British Retail Consortium reporting that shop prices slowed again in March by 2.4%; although this figure was marginally better than the 2.7% drop in February. The Halifax reported UK house prices fell at a faster annual pace of -2.9% in March versus -2.8% in February, the steepest decline since October 2009.

Overnight, Australian unemployment defied expectations and fell from 5.0% to 4.9% in March which strengthened both the Aussie and Kiwi Dollars.

Today's is all about central bank meetings which are expected to have two different outcomes. First up comes the Bank of England monetary policy committee (MPC) at 12 noon. We don't think enough has changed to push enough of the committee into a interest rate hike however, there is a chance they will raise interest rates and so a no change decision could push Sterling down.

As for the European Central Bank at 12:45, there is little doubt in the markets' mind that interest rates are going higher. The question is by how much. We think there is some doubt about a hike so a 0.25% rate hike should appease those pushing for higher interest rates whilst not upsetting the countries experiencing fiscal difficulties too much. This decision is already be priced in so there is a risk the Euro could be sold off in the aftermath, as investors settle their positions which have already been profitable in the run up to the meeting.