In a speech yesterday, Mark Carney stated that a prolonged period of low inflation in the UK might delay the timing of an interest rate rise in the UK. These dovish signals by the BoE Governor weighed on expectations that the central bank might tighten its policy stance earlier than anticipated and caused Sterling to fall below the 1.49 mark against the greenback.

Across the Atlantic, after yesterday’s downbeat retail sales print strengthened concerns that domestic consumer spending remains weak, traders will eye today’s preliminary Reuters/Michigan consumer confidence survey for further direction. In Germany, today’s data showed that February’s wholesale price inflation rose after four straight months of decline.

Pound Sterling – UK Markets

Yesterday, the Pound initially gained ground against the greenback. Data released in the UK showed that the nation’s trade deficit narrowed more than expected for January as service exports surged and cheaper oil helped lower Britain’s import bill. Additionally, the RICS survey revealed that house prices in the UK rose more than expected for February due to an increased shortage of properties in the country. However, Sterling reversed its early session gains against the US Dollar and fell below the 1.49 mark following dovish remarks by the BoE Governor, Mark Carney. He stated that prospects of a prolonged period of low inflation cannot be ruled out, amid deflationary headwinds from abroad and an elevated Sterling, and hinted that such a scenario could delay the timing of an interest rate rise in the UK.

The just out data has shown that Britain’s construction output increased for January and registered its twentieth straight rise. Going forward, market participants will keep a tab on the minutes of the BoE’s latest policy meeting and the official labour market report in the UK next week, for further direction.

US Dollar – US Markets

The US Dollar retreated from its earlier session gains and nudged slightly lower against the Euro yesterday after data released in the US showed an unexpected decline in retail sales last month. Retail sales fell sharply for February as automobile purchases dropped and consumers spent less at restaurants. Harsh weather most likely impacted sales during the period. Another data release showed that businesses slowed their stockpiling for January which can largely be attributed to falling sales. The decline in sales and drop in inventories indicates caution among consumers and producers. Meanwhile, claims for unemployment benefits fell more than market expectations for last week which reaffirmed that the job market in the US continues to improve.

The US Dollar is trading higher against the major currencies this morning, ahead of the preliminary reading of Reuters/Michigan consumer sentiment report for March. The reading is expected to be largely stable from last month. Yesterday’s retail sales report and today’s consumer sentiment data will offer an encompassing view about consumer morale in the US during the first quarter. Finally, investors will keep a tab on the US producer price inflation data for February, scheduled today.

Euro – European Markets

After trading close to the 1.05 mark, the Euro rebounded against the greenback yesterday following the release of disappointing US retail sales data. Meanwhile, data from the Euro zone showed that industrial production fell more than expected for January, as the output of durable consumer goods fell sharply. The industrial output data has renewed concerns over the outlook for manufacturing activity in the single currency bloc. Separately, data revealed that consumer prices in Germany and Spain for February matched the preliminary prints.

The single currency is trading in a tight range against the major currencies this morning. With no major economic releases in the Euro zone today, market participants will look forward to the final print on consumer prices in the Euro region for February, scheduled early next week. The German ZEW survey will also attract attention to gauge investor morale following the commencement of the central bank’s bond buying programme.

Other Currencies – Highlights

The Japanese Yen is trading in a tight range against the US Dollar this morning. The greenback had earlier lost ground following the release of weak retail sales numbers in the US yesterday. While appearing before the lower house budget committee this morning, BoJ Governor Kuroda, stated that he expects consumer prices to rise due to wage growth and rising inflation expectations. However, the Japanese Yen failed to find much support from his comments. Additionally, data released earlier showed that on a monthly basis, Japan’s industrial production rose less than the initial estimates for January.

The BoJ’s monetary policy meeting commencing on Monday is the major event in Japan next week. The central bank is expected to leave its monetary policy unchanged and is anticipated to focus more on the factors that are not helping it to achieve its inflation target.