Sluggish GBP Awaits UK Inflation,

Euro rebounds on Portugal bailout ratification and Greek resolution optimism, UK inflation figures due and RBA minutes.

The single currency seems to be finding some support on the back of optimism that todays resumption of the EU ministers meeting will bring further clarity to the situation with respect to Greece. Formal ratification yesterday of the Portuguese bailout, overcoming Finnish objections has also calmed some frayed European nerves.

This optimism could well be misplaced, despite Angela Merkels assertion that she was against debt restructuring by any country before 2013. She went on to say that doing so could be damaging to Europes credibility. It does appear unlikely that the markets will gain any clarity today as the IMF has yet to finish its report, and Greece has until Thursday to submit a revised fiscal plan. EURUSD key resistance level remains 55 day MA at 1.4280, and support at 200 week MA at 1.4000

Sharing the limelight with Europe is the pound with the publication of UK inflation data for April. UK CPI is expected to rise slightly to 4.1% after Marchs surprise fall, though given that crude oil hit all time highs in sterling terms last month, it would not be surprising if the figures came in higher. Retail prices are expected to slip back to 5.3% from 5.4%. In any case even if the data were to come in on the high side of expectations it seems unlikely it will make any difference to the current low interest rate policy especially now that the main proponent for higher rates. Andrew Sentance, has now left the MPC to be replaced by Ben Broadbent, Goldman Sachs chief economist. Resistance on sterling at 1.6290, 55 day MA.

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The recent decline in the Australian dollar though partly due to the sell off in commodity prices was also down to this months decision by the Reserve Bank of Australias to keep interest rates unchanged at 4.75%. Given recent softness in economic data it could well be that policymakers had good reason for holding fire and todays publication of the minutes appears to confirm that prognosis. The minutes stated that the bank remained of the view that the current mildly restrictive monetary policy remains appropriate for now, even if higher rates would probably be needed later on.

Support on the AUDUSD remains around the 1.0500 level.

US housing starts and industrial production data is due out later and expected to show positive prints for April but at slightly lower levels than March.

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By KM - AshrafLaidi.com staff.