Sterling awaits BOE minutes

Today's Highlights

Chinese PMI drops

Australian inflation down – takes AUD with it

Sterling awaits BOE minutes

NZ interest rate hike expected tonight

FX Market Overview

Happy St George's Day everyone.

I know it isn't very British to celebrate England's Patron Saint but I don't really care for that kind of stiff upper lip nonsense. St George is also the patron saint of Aragon, Catalonia, Ethiopia, Georgia, Greece, Lithuania, Palestine, Portugal, and Russia, as well as the cities of Amersfoort, Beirut, Cáceres, Ferrara, Freiburg, Genoa, Ljubljana, Gozo, Pomorie, Qormi, Lod and Moscow. So to everyone in those places, Happy St George's Day to you as well,. Tea anyone?

As for the financial markets, well Tuesday was the first day back in the office for a lot of traders and they were suffering a sugar low after all the chocolate of the weekend, so we can forgive them for the lack of volatility. There were some bright spots though.

French manufacturing and service sectors slowed sharply in April. Both sectors are in the growth end of the index but only just. That put a dampener on the Euro but didn't cause a major upset. We get the more important German and Eurozone wide indices today so there is plenty of scope for weakness in the Euro is these are as poor as the French numbers.

Keeping with the 'slowdown' theme, the Chinese manufacturing sector contracted for the fourth straight quarter in April. The Purchasing Managers Index did improve marginally but at 48.3, the index reading is still solidly below the '50' breakeven point between expected growth and contraction. That weakened the currencies of the countries that rely on China for export sales. The Aussie and New Zealand dollars are amongst them. It also weakened the Chinese Yuan to its lowest level in a very long time. If that might be advantageous to you, as long as your payee can receive the CNH Hong Kong based version of the Yuan, we can help you pay in that currency. It may just give you a little bit of saving over the usual USD payments into China.

Australian inflation dropped to 2.9% in the 1st Quarter of the year. That was quite a bit below the market expectation of 3.2% and it hit the Australian Dollar overnight. We saw the AUD lose a couple of cents against the Pound and lose ground elsewhere as well as analysts scaled back their expectations of any interest rate hikes. That was never a cert anyway but there had been a growing suspicion that the Reserve Bank of Australia might move early.

We will find out tonight whether the Reserve Bank of New Zealand moves the NZ base rate. There is a very strong chance of a 25 basis point hike and that would bring the NZ interest rate back to levels not seen since before the Christchurch earthquake. The NZ Dollar is likely to strengthen in the next 24 hours so anyone with NZD to buy has a small window of opportunity.

The rest of today is focussed heavily on the UK. Government borrowing figures will be a little lost in the melee surrounding the release of the minutes from the last Bank of England's rate setting meeting. Everyone is looking for clues and cues on the next interest rate adjustment. Falling inflation, rising employment and rising wages are all causing the BOE a headache because they call into question the Governor's suggested 2015 timing of the first interest rate hike since the recession. It is going to be an interesting morning.

This afternoon brings Canadian retail sales data but that is expected to maintain the status quo as far as the Canadian Dollar is concerned. We also get the Markit Purchasing Managers Index from the US and that is a pretty erratic data set so there is scope for US Dollar volatility. With Sterling pressing against a very long term, resistance level against the US Dollar, a break to higher levels would be very significant indeed.

The other news story that caught my eye was that of 10 year old Willie Myrick of Atlanta, Georgia. He was snatched by would-be kidnappers outside his house. However, the kidnappers released him after 3 hours without getting any ransom paid after he sang a gospel song loudly and continuously in the back of the kidnappers' car. Is that the most obvious story of being passive aggressive you have ever seen.