Today we saw some interesting data cross the wires headlined by the U.K. CPI figures which showed that the pace of the decline in inflation was slower than expected with it easing to 2.2% from 2.3%, instead of the 2.0% that was expected. This will underline the concerns that were expressed at the G-8 that upside risk for inflation are re-emerging which will develop a need for an exit strategy from the prevailing QE measures. This may lead to a rise in interest rate expectations for the U.K., U.S. and Europe. The BoJ raising their outlook for a second month, a rise in German ZEW and US housing starts have all contributed to a brighter outlook for the global economy. which has weighed on the dollar. Tomorrow's UK employment numbers are expected to show more job losses, but if we start to see the labor market stabilizing as in the U.S. it could add support for the pound. US CPI will garner significant attention on the heightened inflation concerns, but with PPI number falling mare than expected we could see a consumer prices fall more than the -0.9% expected, which could send the dollar lower as it would justify the current Fed policy and allow them to refrain from raising rates until mid 2010 as they predicted.

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John Rivera is the author of Market Brief, Top FX Headlines, and Forex Trading Weekly Forecast on DailyFX.com.