Today’s upbeat UK retail sales print for February has shown that local spending remained supported by lower energy costs. In light of this week’s mixed inflation report, a more than expected upside in today’s retail sales data has strengthened expectations that demand remains buoyed on the domestic front. In line with this week’s robust data, today’s GfK survey in Germany showed that morale among consumers in the nation improved for April and fuelled anticipation that overall activity in the Euro bloc is improving.

Across the Atlantic, a report released yesterday revealed that durable goods orders in the US declined unexpectedly for February. Later today, greenback investors will eye the weekly jobless claims survey in the nation for further direction.

Pound Sterling – UK Markets

Data just out has shown that retail sales in the UK rose more than expected for February, as local spending remained buoyed by low oil prices. However, price wars among supermarket retailers in Britain weighed on domestic price growth and limited the upside in last month’s retail sales. The Pound has continued to trade on a firmer footing against the US Dollar following the release of today’s data. Going forward, traders will keep a tab on Mark Carney’s speech tomorrow. Although his comments are not expected to offer any fresh insights into the timing of an interest rate rise in the UK, especially after he recently hinted that a protracted period of low inflation is likely to postpone the central bank’s plans to tighten its policy stance.

In yesterday’s trading session, the British Bankers' Association’s survey revealed that mortgages approved by UK banks rose more than expected for February and climbed to a five month high, strengthening expectations that activity in the nation’s housing market is improving. However, Sterling investors showed little reaction to this print and the Pound remained range bound against the greenback yesterday.

US Dollar – US Markets

The US Dollar traded on a weaker footing against the Euro yesterday, with the single currency moving close to the 1.10 mark. Economic data released yesterday showed that on a monthly basis, orders for durable goods dropped more than market estimates for February. A rising US Dollar and slumping energy production were the probable causes for the weak data. Falling crude and commodity prices may have caused oil and mining companies to curb purchases of new equipment, while a stronger Dollar makes US goods more expensive to customers overseas and could have impacted export orders. Meanwhile, US mortgage applications, including refinancing and home purchasing, rose last week as interest rates dropped to their lowest level since February. Elsewhere, the Chicago Federal Reserve Bank President, Charles Evans, voiced concern that a stronger US Dollar presents clear deflationary pressure and would make it harder for the Fed to reach its 2% inflation target.

The US Dollar is trading in a tight range against the majors this morning, ahead of a weekly report on jobless claims in the US and the flash estimate of services PMI for March.

Euro – European Markets

The just released macro data from Euro zone’s largest economy has pushed the Euro to trade higher against the majors this morning. A survey by Gfk showed that consumer morale in Germany for April was at its highest level in over 13 years, signalling continued strength in the nation’s economy. The forward looking consumer confidence indicator that came in higher than market expectations has raised hopes that the German economy is on track to generate strong growth in the first half of this year with private consumption playing a key role. Meanwhile, the second estimate of French GDP data for the fourth quarter of last year was in line with the preliminary print and in line with market expectations.

The Euro traded higher against the greenback yesterday, supported by an upbeat reading of Germany’s Ifo business climate and business expectations, both of which climbed more than market anticipations for March. The report added to evidence that the Euro zone’s economies are getting a boost on the back of the ECB’s stimulus programme that has also put the single currency under pressure.

Other Currencies – Highlights

After reversing its earlier session weakness, the Canadian Dollar is currently trading higher against the US Dollar, ahead of a much anticipated speech by the Bank of Canada (BoC) Governor, Stephen Poloz, scheduled later today. With little domestic data on tap this week, market participants will keenly eye the upcoming speech for cues on a further rate cut in April. The central bank had in its January monetary policy meeting unexpectedly cut its interest rate to 0.75% from 1%. Last week’s disappointing economic releases, consistent with a slower pace of economic growth seen in the fourth quarter, have raised expectations of further easing by the BoC.

The Canadian Dollar traded on a weaker footing against its US counterpart yesterday, after BoC Deputy Governor, Timothy Lane, warned that growth in the first half of the year might be well below 2%. However, he added that the Canadian economy would return to full potential in a few years as strong growth is expected in non-energy exports, buoyed by a weaker currency. Canadian January GDP is due early next week and is keenly awaited.