Sterling Looks for Direction
The CBI distributive trades survey is the only notable macro update in the UK today. This survey will be eyed to gauge the health of domestic spending, particularly after retail sales dropped more than expected last month. Going forward, tomorrow’s BBA print will be eyed in the UK to gain an insight into the health of the real estate segment, especially considering that various housing market surveys have been mixed of late.
In the Euro zone, Germany’s Ifo survey released earlier today indicated that morale among firms improved less than expected for February. Across the Atlantic, after Friday’s preliminary Markit manufacturing PMI reading showed an unexpected improvement for February, tomorrow’s flash services PMI data in the US will attract some attention among traders.
Pound Sterling – UK Markets
Sterling has continued to trade on a weaker footing against the greenback this morning after the pair nudged below the 1.54 mark earlier today. Market participants will keep a tab on today’s CBI distributive trades survey in the UK to gain an insight into February’s spending levels, especially after last month’s retail sales missed market estimates. Going forward, tomorrow’s BBA mortgage approvals data in the UK will attract considerable attention, particularly after Rightmove’s recent report indicated a shortage in properties for sale in the UK.
In Friday’s trading session, the Pound lost ground against the US Dollar. A report released in the UK revealed that retail sales for January dropped for the first time in four months. Considering that retailers in the UK have been cutting prices to attract consumers, lower prices seem to have offset the positive impact of strong real earnings growth and elevated confidence on overall spending levels. Meanwhile, another report revealed that Britain’s public sector net borrowing swung to a surplus for January, fuelling hopes that the Prime Minister, David Cameron, might be able to meet his fiscal obligations.
US Dollar – US Markets
The US Dollar weakened against the Euro while it was broadly higher against the Pound on Friday. The preliminary Markit manufacturing activity reading in the US indicated that factory output ticked higher for February despite widespread delivery delays caused by heavy snowfall and port strikes. The report also revealed that the US economy entered a slower phase of growth in the first quarter as weak demand for oil and energy infrastructure projects weighed on new order intakes.
The greenback is trading in a tight range against its key peers this morning ahead of US existing home sales data for January scheduled later today. Markets expect existing home sales to decline, especially after data released recently by Reuters/ Michigan showed that consumer morale in the US weakened on concerns about wage growth. The new home sales report for January which is due on Wednesday would give further insight into the housing sector performance. Going forward, market participants will keep an eye on Tuesday’s testimony by the Fed Chairperson, Janet Yellen, to the Senate Banking Committee for indications on the timing of an interest rate rise in the US.
Euro – European Markets
On Friday, the Markit flash manufacturing PMI report showed that the Euro zone private sector activity expanded for February, although firms continued to cut prices amid underlying concerns over the persistent low level of inflation. Among Euro zone member nations, better than expected preliminary services PMI data from Germany heightened hopes of a pick-up in euro area economic activity for February. Meanwhile, the single currency edged higher against the US Dollar on Friday after Euro zone officials approved the extension of Greece’s current bailout programme by four months in the Euro group meeting. However, Greece would need to provide a list of reforms today which will be scrutinised by its international creditors for a broader agreement.
The Euro is trading lower against its major peers this morning, as news from Greece continues to remain in the spotlight. On the macro front, data released earlier today showed that the Ifo business climate index in Germany improved less than expected for February. Investors will now eye the revised fourth quarter GDP readings from Germany scheduled tomorrow for further direction.
Other Currencies – Highlights
The Japanese Yen is trading lower against the greenback this morning. Meanwhile, the minutes of the Bank of Japan’s monetary policy meeting for January released over the weekend showed that few board members expressed concerns over achieving the inflation target. The minutes also revealed that members believed that the nation’s economic activity is recovering at a modest pace, with inflationary momentum having slowed down due to falling oil prices. At the meeting, the central bank also extended its loan scheme by one year to encourage banks to boost lending.
Market participants now look forward to Tuesday’s testimony from the US Federal Reserve Chairperson, Janet Yellen, for fresh cues on the timing of an interest rate rise which might influence the currency pair’s direction. Additionally, Japan is set to release a string of economic data, including reports on household spending, inflation, retail sales and industrial production, later this week.