This morning saw the release of the Independent Commission on Banking (ICB) preliminary report on competition and stability in the financial sector. Rumours of a recommendation to break up Britain’s largest banks did not materialise, and shares in Barclays and Lloyds Banking group were up in early trading on the news. The Pound is unchanged after the release. The report did call for core tier one capital ratios of at least 10 per cent, higher than the current 7 per cent level and it also recommended the ring fencing of savers deposits from risky investment banking operations. Full details of the report will come out over the course of today, but there will the main criticism will be that  the recommendations maintain the status quo, and do not go far enough in the reforms attempting to prevent the next banking crisis.

Sterling data this week includes Jobless claims on Wednesday and CPI on Tuesday. The inflation figure is particularly important in light of comments by Andrew Sentance, who indicated that the tide of opinion on the MPC is shifting towards interest rate rises. He suggested that some of the ‘temporary’ factors putting upward pressure on prices may, in fact, not be that temporary given the current rate of global expansion. The figure is expected to be unchanged at 4.4%, but any surprise will be to the upside.

The Euro shrugged off an interest rate rise and Portuguese bail-out last week and continues to trade very strongly against the Pound and Dollar. Sterling conceded further ground over the weekend as Germany announced an upgrade of GDP, even as details of Greek debt restructuring emerged and talk of Irish negotiations on their debt continued. With the lack of substantial Eurozone data this week, political events will be the key driver.

With a temporary US budget deal finally agreed – and governmental shut down avoided – all eyes are now on Thursday when this stop gap measure runs out. US data this week include advance retail sales, CPI and University of Michigan confidence survey

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