Amidst the growing uncertainty in the run-up to the UK referendum on European Union (EU) membership in June, the International Monetary Fund (IMF) yesterday warned that a vote to leave could inject another risk to UK economic growth which is already under pressure from slowing global trade and turmoil in financial markets. Meanwhile, the just out revised estimate of UK GDP confirmed that the economy modestly grew in the fourth quarter, but better than most other developed economies.

In Europe, the GfK survey findings showed that German consumer morale improved heading into March on the back of a stronger labour market and expectations of higher future income. Across the Atlantic, an initial print of January’s durable goods orders and jobless claims figures will attract significant market attention.

Pound Sterling – UK Markets

The Pound has slightly recovered from its losses against the greenback this morning. On the macroeconomic front, the just out revised estimate of UK GDP growth for the fourth quarter indicated that the UK economy gradually expanded from the third quarter, confirming the preliminary growth reading. The figures reinforced that growth in the UK economy was almost entirely driven by consumer spending at a time when global slowdown weighed on the nation’s exports. Another set of data showed that UK business investment contracted in the fourth quarter, the largest drop in nearly two years. Today’s figures suggest that the Bank of England is likely to retain its current policy stance throughout the year. Going forward, the GfK group’s consumer sentiment survey on the UK economy is scheduled for release tomorrow.

The Pound slipped below the 1.39 mark against the US Dollar for the first time in seven years yesterday amid continued uncertainty that has gripped the UK economy ahead of a June vote to leave the European Union. The IMF cautioned that the months leading up to the Brexit referendum could have economic consequences.

US Dollar – US Markets

Market sentiment for the greenback remains largely subdued against the Euro this morning ahead of key economic data in the form of durable goods orders and initial jobless claims in the US, scheduled for release later in the day. The US durable goods data which comes ahead of tomorrow’s domestic growth figures is anticipated to make a sharp recovery from the previous month’s slide. Meanwhile, this week’s dismal flash data for US manufacturing activity added another layer of worry for the nation’s manufacturing sector. If forecast for today’s durable goods data holds true, it should somewhat ease concerns regarding the health of the manufacturing economy. However, it would take more than one upbeat report to influence the Federal Reserve to further increase its interest rates. Separately, a weekly report for the US labour market is estimated to show a higher level of first-time jobless claims for the last week.

The US Dollar pared part of its gains against its key peers yesterday after the release of disappointing US economic data.

Euro – European Markets

The shared currency trimmed part of its gains against the Pound this morning, following a mixed set of data releases in Germany. The unexpected GfK survey results showed that consumer sentiment in Germany is set to improve in March, dismissing recent worries regarding the global stock markets and the influx of refugees. The consumer confidence index unexpectedly nudged higher for March largely due to the continued strength of the German labour market. The GfK survey also revealed that consumers’ income expectations noticeably rose, while economic outlook slightly weakened. In separate data, the final Harmonised Index of Consumer Prices matched preliminary estimates for January, contracting from a month ago. Additionally, Spanish growth figures showed that output grew in the fourth quarter and in line with expectations.

Going forward, the Euro zone’s final inflation print for January is also on tab today. Expectations are for the core inflation rate to rise in January, as previously estimated. An unexpected slide in today’s CPI update might fuel doubts about the ECB stimulus expansion at its policy meeting in March.

Other Currencies – Highlights

Earlier, the US Dollar – Swiss Franc currency pair was under pressure on the back of recent dismal US economic data that has dampened hopes of an imminent increase in interest rates in the near term. As of now, the pair is trading above the 0.99 mark. Earlier today, data showed that industrial output in Switzerland declined in the final three months of the previous year. Overall, industrial production in Switzerland has remained in contractionary territory in all four quarters of the previous year, fuelling doubts about economic growth recovery in the Swiss economy.

Going forward, trading in the US Dollar - Swiss Franc currency pair will likely be influenced by key US economic releases including durable goods orders and weekly claims for first-time unemployment benefits, scheduled for release later in the day. Market participants will also continue to monitor sentiment around oil price movement and global equities for further cues.