Heading into the extended weekend, sentiment for the Pound continues to remain dampened as the possibility of the UK exiting the European Union has increased. In addition, the just out UK retail sales figures printed in negative territory for February, hinting to a slowing recovery in the first quarter of 2016. The combination of a dismal retail sales report and the growing arguments for the UK to leave the Euro bloc have heightened the case for a further delay in the Bank of England’s (BoE) policy tightening.

Across the Atlantic, traders await the release of key economic data including durable goods orders, preliminary services PMI and jobless claims, which are scheduled later in the session. Earlier today, the GfK survey showed that German consumer morale dipped going into April.

Pound Sterling – UK Markets

The Pound continues to remain pressured against the US Dollar this morning as the risk of Britain leaving the European Union is on the rise following the Brussels terrorist attacks earlier this week. In the UK data space, the just out retail sales figure indicated a sharp slowdown in consumption for February as colder weather shunted demand for clothing. UK retail sales contracted less than estimates for February, signalling slowing economic growth in the first quarter which is likely to put increased pressure on the BoE to further delay its normalisation cycle. Earlier in March, the British Retail Consortium had reported that UK retail sales growth slowed to a standstill in February after a strong start to the year. Consequently, today’s dismal UK retail sales data has added to further downside pressure on Sterling against its key peers.

The UK’s retail sector will continue to remain in focus for the remainder of the day as the Confederation of British Industry releases an early March update of the Distributive Trades Survey later today. This leading indicator of retail spending for March is anticipated to hold steady at the previous month’s level.

US Dollar – US Markets

The US Dollar is trading on a stronger footing against the major currencies this morning ahead of a slew of key economic releases in the US, due for publication later, that could back some recent Federal Reserve (Fed) officials’ optimistic views about the economy. However, expectations are for a report today to show that durable goods orders declined in February after sharply recovering at the start of this year. Yet, hopes are high for today’s services flash PMI for March to reassure that the US economy is still on track to record a modest growth in the first quarter. Also, jobless claims will be watched in the US for signs of sustained strength in the labour market that should further dispel fears of a recession.

Yesterday, the greenback pushed higher across the board amid hawkish signals from Fed officials this week and as investors continued to monitor geopolitical developments. On the macro front, sales of newly built homes in the US modestly rose in February, signalling a gradually improving residential industry amid a shortage of properties in the market.

Euro – European Markets

The common currency nudged lower against the US Dollar this morning after a report by the GfK market research group indicated that consumer confidence in the largest economy of the Euro zone fell, heading into April. Data attributed the decline in German consumer morale to economic downturns in China and in the US export market. Weaker demand for German products from overseas is likely to have made consumers cautious about the domestic economic growth outlook. The German economy had expanded at its strongest rate in four years in 2015, driven by robust private consumption. The lack of enthusiasm among German shoppers which is reflected in the drop in economic expectations indicates a possible slowdown in early 2016. Elsewhere, French business conditions unexpectedly deteriorated for March. On a positive note, Italy’s industrial sales and orders rose in January.

Yesterday, the Euro – US Dollar currency pair traded close to its daily low on a very quiet day, with practically no data except Italy’s wage inflation which was released in the early hours of trading.

Other Currencies – Highlights

The Japanese Yen resumed trading lower against the US Dollar earlier today as the greenback remains supported on the back of hawkish comments by Fed officials this week, which increased speculation of a rate increase as early as in April. Looking ahead to domestic economic updates, Japan’s inflation data is due for release in the session ahead. Today’s inflation updates from Japan will attract significant market interest, markets anticipate that the Bank of Japan (BoJ) will implement further policy action in the next meeting in April. The headline inflation rate for February is anticipated to rise after coming in at an annual rate of zero in the previous month. Similarly, the BoJ’s preferred core consumer price index, excluding the effect of fresh food and energy, is anticipated to slightly rise for February.

Additionally, a string of noteworthy economic releases in the US today including durable goods orders, flash services PMI and jobless claims will be eyed by investors for further direction in trading in the US Dollar - Japanese Yen currency pair.