UK inflation hit 4.5% in April, an increase from March’s 4%, a 2-1/2 year high. With the U.K. economy contracting in the fourth quarter of 2010 and hardly expanding in the first quarter 2011, coupled with cuts in government spending, the Governor of the Bank of England Mervyn King warns that in reacting too quickly to rising prices [i.e. increasing UK interest rates] could harm the economy. Initially sterling strengthened jumped yesterday after a bigger-than-expected rise in UK consumer prices, as investors acknowledged higher inflation will hardly lead to an interest rate anytime soon. Out today we have BoE’s MPC minutes which will shed further light on the BoE’s thinking. So call in now to get the latest news and prices.

The euro is weighed down by concerns that Greece might restructure its massive debt. Jean-Claude Juncker, chairman of euro zone finance ministers, said for the first time yesterday that Greece may have to ask investors to extend the maturities of the Greek debt. This will be a default in most peoples minds. The IMF will complete in mid- June its detailed analysis of Greek debt which means another month of uncertainty. The main support for the euro is that interest rates at least in the short term are expected to rise faster in the euro zone than in the U.S. German investor sentiment data released was weaker than expected. Call in now to see which way the euro is moving today.

The price of oil and the dollar are going in opposite directions. Oil prices went down slightly yesterday, pressured by a firmer dollar. Industrial and housing data out yesterday in the US disappointed. This led to an increase in risk aversion which benefited the US$.

The Australian dollar was up 0.45% at $1.0600, helped by yesterday’s positive minutes from the Reserve Bank of Australia. With regards to the Chinese Yuan, economist have suggested that it is possible for it to rise 5-6% this year as China still needs to curb consumer inflation. The New Zealand dollar fell versus the US dollar as stocks and commodity prices weakened..

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