• French April EU-harmonised CPI +0.1% m/m, +0.1% y/y, slightly weaker than median forecasts of +0.2% for both
  • French March current account -2.2 bln euros vs February revised -2.0 blnFrench 2009
  • French industry investment seen at -18% from -12% in previous forecast -Insee
  • German cabinet approves bad bank plan – Government source
  • German FinMin Steinbrueck: Interbank lending still hit by weak confidence
  • Euro zone March industrial output -2.0% m/m, -20.2% y/y. Weaker than median forecasts of -1.0% and -18.0% respectively
  • BOE quarterly inflation report: Sees GDP troughing with an annual fall of around -4.5% at the start of Q-2, which is worse than government and general forecasts.
  • BOE sees inflation troughing at around 0.5% at the start of Q-4 2009 before picking up to around 1.2% in 2 years time.
  • BOE: Timing and strength of any recovery remains highly uncertain
  • King: Even if recovery in next 6-9 months doesn’t know how sustainable it will be

EUR/USD lower during morning. Proximity of barrier option at 1.3750, and probable defence of it, helped limit upside. BIS seen selling above 1.3700 which also weighed on pairing as did the release of worse than expected euro zone March industrial output data (see above)

Cable saw very choppy trade early, caution ahead of the BOE inflation report evident. An early sell-off was met by strong sovereign, real money purchases in the mid 1.52’s and we bounced back above 1.53 to a high around 1.5330.

The pairing was sitting comfortably above 1.5300 when the release of the BOE quarterly inflation report pulled the plug. The market certainly didn’t like the growth forecast, the bank seeing GDP troughing with an annual fall of around -4.5% at the start of Q-2. This is some way below government and general forecasts. The whole tone of the report and comments by Mervyn King at his press conference were pretty dour. (see above) Cable slumped over 1 1/2 cents on the release/press conference comments to a session low 1.5143. Presently 1.5160.

The yen saw decent across the board strength, USD/JPY giving up about 50/55 points while EUR/JPY sold off to 131.10 at wrting from an early 132.30. Sources report decent sell orders lying up in await at 96.70.