The pound recovered the losses it suffered against the single currency on Monday in choppy trading yesterday, despite official statistics revealing that retail prices had fallen for the first time in almost half a century, and ZEW releasing a better than expected economic sentiment survey in Germany. The Retail Price Index in the UK hit -0.4% year-on-year in March, which is the first time inflation has been negative since 1960, whilst the Consumer Price Index – the government’s official measure of inflation – also fell to 2.9%, although remains above the government target range. Despite the inflation figures, a hawkish member of the Monetary Policy Committee, Andrew Sentance, said that he could see glimmers of recovery in the economy.
Markets are bracing themselves for today’s budget, where Alistair Darling will have to admit the economy is set to contract 3-3.5% this year – a staggering three times worse than what he forecast just five months ago. Investors will also listen carefully to how the chancellor is planning to tackle the mounting debt problem the UK is facing up to.
There are no major economic announcements due in the eurozone today, whilst there is a plethora of data being released in the UK alongside the budget. The Bank of England minutes will be of particular interest, whilst unemployment figures, money supply, and public borrowing figures are also released.
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