Data just released indicated that UK’s labour market remained robust, as Britain’s ILO unemployment rate fell further to 5.5% in three months to March. At the same time, wages showed some tentative signs of a pick-up, with average earnings rising more than market estimates. Market attention now shifts to the quarterly inflation report scheduled later today for further hints on the overall health of the economy.

Across the Atlantic, retail sales data is expected to draw maximum market attention today as investors look for cues of a pick-up in economic growth at the start of the second quarter. Moving ahead, Euro zone’s first quarter GDP numbers will be keenly eyed, especially after Germany’s GDP print, earlier today, pointed to a slower economic growth.

Pound Sterling – UK Markets

The Pound soared to multi-month highs against the US Dollar, as yesterday’s upbeat economic releases added to the positive sentiment following the UK general election results. Data showed that UK industrial production grew more than expected for March due to a rebound in oil and gas output, thereby confounding expectations that production will remain stagnant for March. Also, the manufacturing output report came in better than market expectations, though slightly lower than February’s upwardly revised reading. Adding to the positive tone, the NIESRGDP estimate indicated that Britain’s economy picked up pace and grew by 0.4% for three months to April. The NIESR also predicted the UK economy to grow by 2.5% and 2.4% in 2015 and 2016, respectively.

The just released UK labour market data showed that the unemployment rate ticked down to its lowest since 2008, in line with market expectations, leading the Pound to move closer to the 1.57 mark against the US Dollar. Improving labour market and a rebound in industrial output adds to evidence of a strengthening UK economy.

US Dollar – US Markets

The US Dollar is trading in a tight range against the Pound this morning ahead of the release of key US retail sales data later today. Markets expect retail sales to rise modestly for April, following previous month’s numbers that had created an uncertain consumer spending picture. Last month’s data had indicated that consumers refrained from spending their energy savings, thus hurting retail sales numbers. Today’s retail sales figures will be closely watched to gauge the impact of the recent uptick in oil prices and a surge in consumer confidence levels. Going forward, investors will eye Friday’s Reuters/Michigan consumer sentiment index for further clarity on the consumer spending outlook.

The US Dollar traded on a weaker footing against the major currencies yesterday, as a renewed sell-off in global bond markets weighed on the performance of the greenback. In economic news, the NFIB’s survey showed an improvement in confidence among small business owners. Additionally, data showed that budget surplus in the US widened the most in seven years for April due to higher tax receipts.

Euro – European Markets

The Euro has consolidated its gains against the major currencies this morning after data released earlier in the day indicated that France’s economic growth accelerated in the first quarter of this year. The preliminary first quarter GDP print showed that the French economy expanded at the fastest pace in two years, while growth in the Euro zone’s largest economy slowed more than expected. Moving ahead, the conflicting growth reports from the two major economies of the single currency union is likely to fuel concerns about Euro zone’s first quarter GDP numbers which is scheduled for release in a few hours. Additionally, the German annual consumer price inflation rose at a faster pace for April, suggesting that the ECB’s asset purchase programme might have started to reap the desired results.

The Euro rallied against the US Dollar yesterday, before paring some of its gains later in the day. The shared currency was broadly higher against its key peers, largely supported by soaring German bund yields. Also, Greece made a €750 million debt repayment to the IMF yesterday, easing concerns surrounding the cash strapped nation.

Other Currencies – Highlights

The Japanese Yen is trading in a tight range against the US Dollar. The Japanese currency trimmed some of its losses against the greenback earlier today after data showed that Japan’s current account surplus rose to its highest level since March 2008, helped by a weaker Yen that boosted the nation’s overseas investments. Additionally, Japan posted its first monthly trade surplus in almost three years for March, supported by an increase in exports to the world’s largest economy and cheaper energy import bill. Adding to positive news, a forward looking survey on Japan’s economic outlook indicated improved optimism about the nation’s recovery.

In the day ahead, market participants will focus on US retail sales data which will provide a clearer picture about the economic recovery that can be expected in the second quarter. In Japan, next week’s industrial production and preliminary first quarter GDP data will attract market attention for further cues.