Market Report

The U.K. pound was little changed before a report expected to show that retail sales rose for a third month in April, reinforcing the case for the Bank of England to keep raising interest rates this year.

The pound traded near a two-month low versus the euro and a four-week low against the dollar after inflation slowed last month and the BOE said in a quarterly report two days ago that the outlook for prices is "unusually uncertain."

The yen headed for a fourth weekly loss to a three-month low against the dollar as a report showing weakening economic growth is likely to keep The Bank of Japan from lifting borrowing costs anytime soon.

Have a great weekend and enjoy what promises to be a classic cup final.

VC

Finally the interest rate hikes in the UK are taking effect and inflation is coming down. With this news, confidence in the pound is slowly but surely depleting, just like my view on Chelsea winning anything more than just the Mickey Mouse Cup. With further implications that rate hikes will be far and few between in the UK and news of quicker hikes from the ECB, the forth coming months could be a struggle for the British currency. Again, this relates to my thoughts on being able to keep our manager and certain key players such as JT.

The US has seen a see-saw couple of days regarding the Dollar. On Tuesday we saw the US weaken on worse than expected CPI, but bounce back yesterday on BOE inflation news and good housing figures in the US. The short to medium term, especially on BOE news there is firm possibility it will head towards 1.90 again by the turn of the year.

We have important news from the Bank of Canada today regarding their CPI. If as predicted and there is an improvement, we could see further strengthening of the Loony bringing it to recent highs.

LR

Sterling ticked up on Wednesday from Tuesday's two-month low versus the Euro, but held steady against the dollar before UK jobs data and the Bank of England's inflation report which should shed fresh light on the rate outlook. Analysts say the immediate risk for sterling may be on the downside as the inflation report could suggest just one more interest rate hike, which many already expect, might be enough to keep inflation in check.

Sterling has struggled to benefit from last week's BoE rate hike to 5.5 percent, the highest among the G7 nations, with Tuesday's below-forecast inflation data triggering a sell-off in the pound.

The Australian dollar fell and bonds gained after a government report showed wages rose less than expected in the first quarter, weakening the case for the Reserve Bank of Australia to lift interest rates this year. It dropped against 13 of the 16 most- actively traded currencies as traders reduced bets the central bank will increase the cost of borrowing from a six-year high of 6.25 percent. The Reserve Bank had cited wages growth as a risk that may lead to higher rates in its May 4 quarterly statement.

J. Sainsbury supermarket group reported a 42 percent rise in yearly underlying profits on Wednesday and set a target to create 3.5 billion pounds of sales growth in the next three years.

I tried telling my mum to save her pennies and shop at Morrison's but she wouldn't listen.

JM

This morning we get a big in slight in to inflation in the UK the Consumer prices data for April are released at 9:30. We expect CPI to a 0.5% rise on the month, taking the annual inflation rate down to 3.0% from 3.1% in March. The consensus expectation is for a smaller monthly increase of 0.3%, and a larger fall in the headline rate to 2.8%. We expect sterling to gain a little momentum.

The RICS housing market survey for April showed unexpected re-acceleration in house prices. The headline price balance rose to 29, from 27 in March (revised up from 26), compared with a consensus forecast of 24. RICS commented that last-week's rate hike might not be the last in the present cycle. Interestingly, though, the ratio of sales to stocks fell for the first time since last May. In the past, this ratio has been a better predictor of house price inflation than has the headline price balance.

Across the pond this afternoon the April Consumer Price Index will be published at 12:30 GMT. Rising energy and food prices are forecast to drive headline consumer prices higher yet again this month. Both we and the consensus look for a 0.5% increase in headline prices in April after last month's 0.6% gain

Have a good day.

DH

Last week saw The FED keep interest rates on hold in the US, and the Bank of England put interest rates up by 25bp.

This week we await Aprils core CPI from the US on Tuesday, as well as an anticipated speech by FED chairman Bernanke on Tuesday and Thursday. We will also have the important CPI data from the UK which is expected to be 3%, down from 3.1% last month. All readers with a mortgage better hope that the CPI figure does come down, other wise there will be more calls for further interest rate hikes.

Congratulations to both West Ham and Wigan for surviving in the Premiership, and commiserations to Sheffield United who will be playing Championship football next year.

Have a good week.

DE

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