With a downside surprise in yesterday’s manufacturing production data in the UK, today’s trade balance update has offered no major surprise to investors and showed that trade deficit in the UK narrowed for October. Today’s data might have provided some relief to the British government, which is aiming to improve the nation’s fiscal health going forward.

Across the Atlantic, yesterday’s upbeat NFIB small business optimism survey for November failed to stir any movement in the greenback, especially after the survey revealed that hiring and new business investments across small firms remained weak. Meanwhile, investors were caught on the wrong foot yesterday after Greece called for a snap election and China tightened its lending norms.

Pound Sterling – UK Markets

Data just out has indicated that trade deficit in the UK narrowed for October as the recent drop in oil prices helped to lower the nation’s import bills. However, the reduction was limited as the benefit of lower import prices was partly offset by a slowdown in UK exports due to subdued demand across Europe. However, Sterling has shown little reaction to today’s data and has continued to trade in a tight range against its major counterparts. With no important macro updates scheduled in the UK in the week ahead, retail sales data in the US along with the much awaited TLTRO auction in the Euro zone will be eyed for further direction to the Pound against its peers.

In yesterday’s trading session, the NIESR indicated that Britain’s economic growth held steady for the three months ended November. However, gains in the Pound-US Dollar pair were capped as investors flocked towards safe haven assets after China tightened its lending norms and posed another hurdle to the already slowing Chinese economy. Additionally, a call for a snap election in Greece further weighed on investors’ sentiment.

US Dollar – US Markets

The NFIB survey for November released yesterday revealed that optimism among small firms in the US strengthened more than expected and reached its highest level since February 2007. Yesterday’s data was in line with the recent upbeat US macro reports and has fuelled optimism about the health of the world’s largest economy. Market expectations have strengthened that the US Fed might be inclined to adopt a slightly more hawkish tone in its upcoming policy meeting. However, the encouraging economic report failed to provide any upside to the US Dollar against its peers, especially after it revealed that small businesses held back new investments and hiring last month.

Meanwhile, the US Dollar is trading in a tight range against its key counterparts this morning. Traders will eye the US Treasury’s monthly budget statement for November later today, which is expected to show a narrower deficit and support claims that the government’s debt burden is reducing. Going forward, investors will keep a tab on tomorrow’s crucial retail sales data in the US for November to better gauge domestic spending levels for the last quarter.

Euro – European Markets

Data released earlier today revealed an unexpected drop in the nation’s industrial output on a monthly basis for October. Considering that the recent Markit surveys indicated that the manufacturing sector in Europe’s second largest economy contracted for the past seven months, today’s data has offered no surprise to investors. Amid ongoing concerns about the weakness in the Euro zone’s macro trend, the unexpected call for a snap election by the Greek Prime Minister has further added to worries.

The Euro is trading in a tight range and marginally below the 1.24 mark against the greenback this morning. Market participants are expected to remain focused on tomorrow’s crucial TLTRO auction in the Euro zone, especially considering that the first TLTRO auction failed to expand the ECB’s balance sheet as per market expectations. A weaker than expected response to tomorrow’s auction is likely to strengthen prospects of more stimulus in the region, particularly after an ECB official, Jozef Makuch, revealed yesterday that most officials were in favour of buying sovereign bonds.

Other Currencies – Highlights

The Aussie Dollar gained ground against the greenback in yesterday’s trading session despite the NAB report indicating that business confidence in Australia deteriorated for November. However, the Australian Dollar pared gains later in the session after the Chinese regulator tightened lending norms, thereby raising concerns among investors about the already slowing Chinese economy. Separately, another macro report released overnight showed that morale among consumers in Australia deteriorated for December. Considering that the nation’s economic growth missed market estimates for the third quarter, the recent signs of weakness in sentiment across the Australian business and consumer segments has stoked worries among market participants.

Going forward, investors will keenly eye the official labour market report in Australia scheduled tomorrow for further direction to the Aussie Dollar against the majors. Additionally, US retail sales data for November will be eyed tomorrow to gauge the health of domestic spending in the world’s largest economy.