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Despite yesterday’s trading volumes being severely depleted resulting from the Bank Holiday across much of Europe and the UK; there was plenty of activity - both in the equity and the currency markets.

The Dollar dropped sharply in the Far East on heavy short covering in Euro/Dollar helped by rumours of strong buying from an Asian Central Bank. The rate rose from 1.3170 to get to 1.3390 before settling at 1.3365 and dragged the other majors with it. Cable moved from 1.4665 to reach 1.4870 before easing. Sterling however, has tracked higher again following a UK bullish article that appeared in the Telegraph in which the Lombard economist predicts that the UK Housing crisis will end by Christmas.

 This will make today’s release of the March RICS housing market survey even more eagerly awaited with expectations of a slightly firmer figure from February’s -78.3% (the lowest figure in more than 30-years). Survey data suggests that growth in enquiries and viewings have become more buoyant resulting in a modest uptick in sales although financing constraints combined with fears of unemployment continue to hold back any significant recovery in activity.

Sterling however has started this morning’s session on the front foot hitting a 5-week high against the Euro of 1.1198 Other UK data is sparse for the following 3 days with most figures of significance deferred until next week owing to the Easter holiday. The US has a heavier calendar however with retail sales for March the highlight for today. The hope is for a continuation of the firmer than expected January and February figures but with the decline of the US auto-makers still headline news, the outcome could be close to a flat overall number.

We also get US producer prices and business inventories. More ‘market moving’ could be scheduled addresses from President Obama, making a ‘Major Speech’ on the state of the economy and from Fed Chairman Bernanke speaking on the Financial Crisis. This leaves forex players again watching equity news for direction and we have already seen European markets open firmer with the early release of very strong Quarter 1 figures from Goldman’s. This sets the scene for a strong opening on Wall Street where we are scheduled to get results from 3 major US corporate, Intel Corp, Infosys-Tech and Johnson & Johnson. The Dollar ought to recover some of its recent lost ground especially given North Korea’s comments that they are considering building their own light-water nuclear plant. This could very well weaken the Yen and send the cross back up through 100.

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