UK Inflation data will be key for Sterling today

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At yesterday's European finance meeting in Brussels, ministers agreed on a €78 billion bailout package for Portugal which reassured investors that the rescue process can operate without the guidance of IMF Head Strauss-Kahn. The news saw the Euro make ground yesterday against Sterling, the US Dollar and the Yen. Eurozone inflation figures had no impact on the markets or the Euro, coming out exactly as expected at 2.8% in the year to April.

In the US, the New York Federal Reserve's manufacturing index halved to 11.9 and the NAHB housing index continued to bump along the bottom at 16/100. There was more disappointing news from the US Treasury which revealed net long-term TIC investment into the US came in at $24 billion in March, down from a revised increase of $27.2 billion in February.

Minutes from the Reserve Bank of Australia overnight help the Australian dollar to move higher as they hinted at an increase in interest rates. Comments from the Treasury secretary that it is "likely the currency would remain strong" reinforced the Aussie dollars' advances.

Today's release of UK consumer price inflation (CPI) for April and the UK house prices data (Mar) will prove interesting for markets. The CPI figures may show a slight increase in the inflation rate, but nothing that should alarm the Monetary Policy Committee and force a rethink on monetary policy.

Indeed, the Bank of England have already indicated that they expect CPI to approach a peak of 5% before dropping back sharply. A figure above expectations of 4.1% should be positive for Sterling. The house price data will also be of interest, since it should show house prices falling.

In the Eurozone, the only data of note is the ZEW's surveys of economic sentiment in Germany and the Eurozone. The finance ministers' meeting continues in Brussels but it is hard to imagine them coming up with any cunning new plan to restructure, reschedule, reprofile, re-engineer, restyle or re-invent Greek's debt before home-time.

In the US, housing starts, building permits, capacity utilisation and industrial production are all released but it will be the 9.30am release of UK CPI that will be focus for the European session.