Consumer prices remained flat in the UK for March, as low oil prices continued to weigh on inflation. Additionally, core inflation in Britain eased unexpectedly, fuelling concerns that the recent weakness in domestic consumer price growth might remain for a prolonged period. In the Euro zone, traders will eye industrial production data which is expected to show a rebound for February and buoy hopes that overall activity in the region is regaining momentum.

Across the Atlantic, today’s retail sales print is anticipated to show a pickup in domestic demand for March, after local sales registered an unexpected fall in the previous month.

Pound Sterling – UK Markets

The just released macro data revealed that as expected, consumer price inflation in the UK remained flat for March, in line with market estimates. The weak inflation reading, mainly driven by a drop in energy and food prices has fuelled expectations that interest rate might not rise soon. Meanwhile, core inflation in the UK showed a surprising ease for March, strengthening concerns among market participants, especially after the BoE Governor, Mark Carney, recently indicated that a prolonged period of low inflation in the nation might delay the timing of an interest rate rise. The Pound has lost ground against the majors following the release of today’s mostly downbeat data. Going forward, Sterling investors will keep a tab on this week’s labour market report in Britain to gauge if domestic wage growth continues to remain buoyed, despite a weakness in local price growth.

The Pound firmed against the majors in yesterday’s trading session after data released by the BRC showed that on an annual basis, Britain experienced robust retail sales growth for March, as food sales recorded its strongest expansion since July 2013.

US Dollar – US Markets

The US Dollar is trading firmer against the majors this morning. Going forward, the greenback is expected to remain supported by macro-releases in the US this week which may help gauge if the recent signs of slowdown in economic activity were a result of transitory factors. Today’s release of retail sales data for March and Friday’s consumer price index report will be closely monitored for cues on whether inflation rates are bottoming out amid signs of stabilizing oil prices and to gauge trends in consumer spending following signs of headwinds in the labour market. Expectations are that the effects of better consumer sentiment along with a warmer weather will help retail sales to rebound for March. In addition, data on producer prices and NFIB business optimism index are also scheduled for release, later today.

Reversing its earlier session gains, the US Dollar lost ground against the Pound yesterday. Meanwhile, the US budget deficit widened more than market expectations for March.

Euro – European Markets

The Euro is trading in a tight range against the US Dollar this morning. Data released earlier in the day showed that Germany’s wholesale prices rose for the third straight month, signalling increase in retail trade and consumption. Separately, the final print on consumer prices in Italy was in line with earlier estimates for March, while Spanish consumer prices rose in line with market anticipation from the prior month. Going forward, industrial production report from the Euro zone due for release later today is expected to add to further evidence about Europe’s recovery prospects. In addition, tomorrow’s ECB monetary policy meeting would attract attention for more clarity into the central bank’s views on the recently launched asset purchase programme.

The Euro traded lower against the Pound yesterday. On the economic front, data showed that France’s current account deficit widened for February, due to a reduction in the growth of international trade of goods and services. Meanwhile, industrial production in Italy rebounded for February, keeping hopes of economic recovery intact after a three year recession in the Euro zone’s third largest economy.

Other Currencies – Highlights

The Australian Dollar is trading on a weaker footing against the US Dollar, ahead of the crucial retail sales data from the US due for release later today. Expectations are that retail sales will exhibit a rebound for March, following a drop in February, led by improved weather and improve confidence amongst consumers. Also traders will keep a tab on the Westpac consumer confidence data in Australia for April, scheduled tomorrow, for further direction.

Following the release of a positive report on Australian business confidence, the Australian Dollar moved beyond the 0.76 mark against the greenback. The National Australia Bank's survey data showed that business confidence in Australia rebounded from a reading of zero in the previous month, due to lower interest rates and as uncertainty over the federal government leadership eased. The bank’s monthly survey also showed that business conditions ticked higher for March, as a pickup in sales and profitability gave firms the confidence to shore up plans for capital investment.