Eurozone inflation could strength Euro

Today's Highlights

Sterling slips on manufacturing and retail data

Eurozone inflation could strength Euro

Federal Reserve minutes awaited

FX Market Overview

Ze Germans gave Brazil a football lesson last night. That's not a line you will read very often is it. Call me a conspiracy theorist but I can't help wonder if anyone had a massive bet on a Brazilian loss. That was the most embarrassing performance at the World Cup since Pitbull in the opening ceremony.

But before the 7-1 drubbing, a surprise drop in UK manufacturing caused a short sharp selloff in Sterling yesterday. The Pound stopped falling and corrected itself a little within an hour but it did mean Euro sellers were able to take advantage of the dip. The Pound dipped again overnight after the British retail Consortium reported a 1.8% drop in shop prices in June. That certainly helps to take the pressure off the Bank of England and the chance of an early interest rate hike just took a step backwards. We'll get the RICS house price survey overnight tonight; another concern for the BOE but for the opposite reason. A booming housing market; albeit regionally disparate, is an inflationary concern. This morning's Halifax house price index showed a fall; the 4th in 7 months and perhaps a sign that this sector of the UK economy may be starting to cool. Yet another reason for the BOE to sit on their collective hands.

Yesterday's other data was about as interesting as Joey Essex's views on quantum physics. However things became less tedious overnight with the release of softer than expected Chinese inflation data. That's a downer for the Australian and New Zealand exporters but the effect on the Australasian Dollars was muted. Overnight we heard that Australian consumer sentiment rose a little less than forecast. To give the survey its full title, the Westpac Melbourne Institute Index of Consumer Sentiment, increased from 93.2 in June to 94.9 in July. That's quite healthy but wasn't strong enough to boost the Aussie Dollar.

The rest of the UK session today will be quiet. We lack data until this evening's release of the minutes from the last Federal Reserve interest rate setting meeting. The debate surrounding the Fed's plans to exit their bond buying schemes will be very interesting. With a slowdown in US data and concerns over the lack of sustained growth, it may be the Fed is shelving the so called tapering plans for now. The US Dollar remains at the weaker end of its ranges but there is the potential for a bit of USD strength if the Fed hints that 'tapering' is still in their plans.

The Euro is stronger than many in the Eurozone would wish and it may well gain some more strength in the next 24 hours. We will get a swathe of Eurozone inflation data. This morning's Greek data is already stronger than expected so there is clearly room for upside adjustments. If so, the BECB will be mightily relieved because the pressure will ease on them taking action to boost the money supply. If you are a euro buyer, you may wish to act sooner rather than later.

Away from the markets, passengers grounded by a storm aboard a Frontier Airlines flight in Cheyenne, Wyoming were cheered no end when the pilot phoned the local pizza place and had 35 large pizzas delivered to the aeroplane as it stood on the runway. Well done pilot and well done Domino's Pizza in Cheyenne who stayed open late to meet the order.