Even though the rise in popularity of the True Finns party in Finland's election was expected, it is significant for a number of reasons. Firstly it follows the trouncing of Germany's Merkel in the recent Baden-Wurttemberg election and that of Sarkozy in French regional elections.

Simply put it seems that the electorates of the core Eurozone countries are not too pleased with the notion that their ruling parties are content to bailout the periphery. This will no doubt shake the political will which has so far seen the Eurozone through its crisis, but for now it seems that this will probably result in increased pressure for budgetary reform in the periphery rather than a fundamental weakening in the overall political commitment to EMU.

Secondly, the rise in the True Finn party is significant because dependent on the eventual composition of the Finnish coalition government there is the possibility that Finland will not endorse a bail-out for Portugal.

The EU currently requires unanimous approval for each use of the Eurozone bail-out fund so it is now being forced to examine ways to push through the Portuguese package without Finnish support. There is no time to lose since Portugal is facing a hefty bond redemption in June.

The Finnish result is potentially a major headache for the EU. Unsurprisingly some of the mud being thrown around the Eurozone is sticking to the EUR this morning. Into the mix of bad EUR news is the threat of Greek restructuring. Rumours of this have been rocking the EUR in early trading.

The real risk of restructuring is that it could open a can of worms in the balance sheets of banks that hold the debt. German and French banks have a high exposure to Greece. Politicians have no wish to see another wave of uncertainty move its way into the banking sector which is why there have been attempts to keep restructuring off the agenda at least until 2013.

However, voters in the core have been limiting the mandates of politicians to throw more money at the problem which leaves the EUR potentially exposed. No doubt politicians and accountants will be working furiously hard in the backdrop to keep the Portuguese bailout on course and to limit the appearance of restructuring on banks balances sheet. Even so, EUR/USD looks likely to move into the long-holiday weekend at the bottom end of last week's trading range. Support at USD1.4290.

MPC minutes due later in the week

The release on April 20 of the minutes of this month's MPC meeting has the potential to rock the pound. That said we view the recent softer than expected March CPI data as already having taken the wind out of the sails of this release.

The market has been pricing out an early BoE rate hike for some week. This process was accelerated with the release of the CPI data. Presently the market is not fully priced for a 25 bps rate hike until October.

Our central case is that the BoE will not raise rates until November. While there is no strong political reason for the three hawkish members to alter their position, we expect that most of the MPC members will want to see the effects of this month's fiscal tightening before voting to raise rates. As a consequence we see no step up in hawkishness in the April minutes relative to March and still view sterling as vulnerable to the EUR on rallies.

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