The lack of news flow or escalations in the Middle East / North Africa helped risk sentiment ease slightly over the weekend.  The miscalculation that turbulent protest have been contained placed a mental cap on the market's exuberance.  Asian regional stock markets were broadly higher with the Hang Seng jumping 1.42% and Shanghai up 0.92%.  EURUSD was able to climb to 1.3790 off the 1.3700 floor while USDCHF jumped between 0.9260 and 0.9290 - a clear sign of the uncertainly in the market place.  Brent crude jumped higher on further supply-anxiety trading at $113.70/bbl, gold is floating at $1410.00/oz.   There's still plenty of reason for uncertainty in the markets going forward.  Saudi Activists and academics are demanding that King Abdullah migrate the kingdom towards a constitutional monarchy.  South Korea is starting scheduled military exercises with the USA causing North Korea to threaten all out war.  There's an interesting rumor floating about that the North Korean regime is taking ammunition away from the military to halt the possibility of a military coup.  In China, officials have dropped their growth forecast for 2011-2015 to 7% from 7.5% on their 5-year plan.  Premier Wn said he thinks the speed of currency appreciation should be steady to avoid social upheaval.  Premier Wen went on to state that the central government would adopt new performance evaluation criteria for local government officials, giving more weight to efficiency, environment protection and people's living standards. Historically, social unrest usually comes on the heels of a massive increase in cost of living - particularly in food expenses.  The recent surges we've seen in commodity prices have been dramatic and may continue to pressure governments around the world.  Emphasis will be on Asian emerging market inflation this week with a slew of regional countries releasing data.  We suspect that the pressure will rise putting local central banks in a tough position having to tighten policy without letting their respective currencies strengthen to the point where it chokes economic competitiveness.  Could be currency wars Round 2. The Swiss Franc has shown once again that it is the King of Risk Aversion.  The CHF gained strongly against the USD and EUR while other currencies remained range bound.  There are increasing signs that the CHF will see a corrective pullback in the near term.  The SNB has become slightly dovish in their comments of late, despite the increase in rate expectations, although the central bank has discreetly continued to push short term interest rates down.  Before we say anything else, let it be known that should social and political unrest increase, especially in oil significant countries, the CHF will continue to appreciate.   For the ECB rate announcement this Thursday, there's increasing evidence that Trichet will ratchet up hawkish rhetoric reinforcing the bank's price stability mandate and preparing the market for its eventual exist.  The combination should the put EURCHF short in jeopardy.  Today, the Fed's preferred measure of inflation - the PCE, will be released.  Despite the omission storm cloud over head, the Fed is still insisting that inflation will not affect the FOMC ultra loose policy. Fed Governor Yellen wasn't concern about higher oil prices, highlighting that oil price shocks have historically generated little spillover into inflation.  While US. Richmond Fed President Lacker, a non-voter in 2011, flat-out stated that oil price appreciation had currently not effected prices in the US nor did they threaten to halt the economic recovery.   All that said, data is a stronger force that dovish rhetoric.  Should we see the USD inflation environment go in the way of the UK and EU, rate hike speculation will increase, especially following recent optimism around US growth, and there will be massive support the USD. On a inflation-denial note, BoE Deputy Governor Bean bucked speculation that he might be moving toward a rate hike when he stated that he was aligned with King's thinking that  higher commodity prices, a VAT hike and sterling weakness were the cause for the UK's extended period of inflation.  We still think that there is enough evidence in the leading survey and despite last week's downward revision of Q4 GDP, the data is pointing upwards and MPC members will be leaning toward a rate hike by May.  If and when the rate hike occurs, it will provide sterling with a sizable boost.