UK inflation may fall below wage prices rise

Today's Highlights

RBA is sort of upbeat

UK inflation may fall below wage prices rise

US mortgage lending at 17 year low

FX Market Overview

For someone who doesn't like the European Union, Nigel Farage sure knows how to get the most out of the EU expenses system. I am not saying he did anything outside of the rules but he used the whole of the £15,000 office expense budget but it became clear that none of the MEPs have to justify how they use the money. There are 766 members of the European parliament and each of them can do the same. That's £11,490,000 that gets paid out - no questions asked. It looks like the tip of a dark monolithic iceberg.

We had the release of the minutes from the last reserve Bank of Australia meeting overnight. The tone was muted but slightly positive. Low interested rates were credited with keeping things moving and the RBA spoke of their expectation of a pickup in the housing market. They are concerned about the delay in any rise in investment but that always lags recovery. The Australian Dollar kept its strength but didn't make any headway.

We heard overnight that the British Retail Consortium reported a fall in like for like high street sales in March but the movement of Easter will have had that kind of impact so the Pound was largely unmoved. This morning's big news from the UK perspective is the release of the latest inflation data. We get the consumer price inflation as well as factory input and output prices - a sort of leading indicator for inflation. It is expected that we will see a small drop in the inflation rate and, if tomorrow's wage price inflation is as expected, this will be the first time in years that wages are rising faster than prices. Yay! Sterling would benefit from that so we may see the Pound hovering until tomorrow's data.

This morning also brings the German ZEW business sentiment index. That is influential and the forecast is good but, with data remaining so mixed elsewhere in the Eurozone, the effect is likely to be less pronounced. The euro largely shrugged off the negative comments of ECB president Draghi yesterday. The ECB hasn't got the image of a radical organisation so the President's suggestion of negative interest rates is being taken with a pinch of salt.

Today brings us the US CPI inflation data but it arrives after a report showing US mortgage lending has hit its lowest level in 17 years. The US Dollar had been making a little headway but that data took the wind out of its sails. The US housing and labour markets are undoubtedly the largest threat to the US recovery so this will make painful reading for the US authorities. We get housing starts and building permits data from the US tomorrow so these will be closely watched. We also get US industrial production data and that is forecast to be a tad softer than last month. The Dollar is in for a bumpy ride over the next 36 hours.

We will also get New Zealand Consumer Price Inflation overnight tonight. The forecast is for a slight dip on the previous month so a small scale sell off in the NZ Dollar is possible. An overnight market order might be just the ticket.

Away from the markets, there is something voyeuristic about watching the Oscar Pistorius trial but watching prosecutor, Gerrie Nel take his evidence apart piece by piece does remind me of Detective Columbo. Younger readers may need someone of more maturity to explain that.

And a father who has been banned by the courts from seeing his children has also been warned by a judge not to send them emails written in capital letters. The Judge says it looks like he is shouting at them in print. HE IS SO RIGHT! DON'T DO IT!

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Be thankful for what you have, you'll end up having more. If you concentrate on what you don't have, you will never ever have enough.