The just released UK retail sales report has revealed an ease in domestic sales for January as consumers in the nation tightened their spending budgets last month, despite growth in real income remaining buoyed. Separately, another report showed a fall in UK’s public debt last month, boosting hopes that the nation might be able to meet its fiscal targets.

In the Euro zone, the preliminary composite PMI reading rose better than anticipated for February, led by a rise in services sector activity, strengthening hopes that recovery in the region’s private sector is regaining momentum ahead of the ECB’s quantitative easing programme beginning next month. Across the Atlantic, the preliminary Markit manufacturing PMI gauge scheduled later today is likely to keep investors interested in the latter half of the trading session.

Pound Sterling – UK Markets

Data just out has shown that, on a monthly basis, retail sales in the UK declined more than expected for January, as cheaper fuel continued to weigh on overall spending levels in the nation. Considering that domestic sales have continued to rise for the last three months of 2014 amid strong growth in real income among UK consumers, a fall in today’s retail sales numbers suggests that consumers tightened their spending budgets last month. Separately, another print revealed that the balance of public spending in the UK swung to deficit for January, strengthening hopes that the Prime Minister, David Cameron, might be able to meet his fiscal target ahead of Britain’s general elections scheduled later this year.

Yesterday, Sterling remained under pressure against the greenback. On the macro front, the upbeat CBI survey revealed that optimism among UK producers strengthened more than anticipated for February. Amid robust growth in real income among local consumers and considering that the ECB is scheduled to start its stimulus next month, prospects of a deterioration in morale among UK manufacturers remains limited.

US Dollar – US Markets

The US Dollar edged higher yesterday, following the upbeat jobless claims data from the US. The US Department of Labour, in its report, indicated that the number of initial unemployment claims were less than expected last week, offering fresh evidence that the labour market continues to remain robust. The claims data was consistent with the strength that the job market has shown in recent months. Meanwhile, the Philadelphia Fed Index dropped for February, even as it remained in positive territory, indicating only a modest growth in the region’s manufacturing sector.

The US Dollar is trading higher against the single currency this morning. Moving ahead, investors will keep an eye on the flash Markit manufacturing PMI report for February in the US, due later today. The preliminary PMI reading is expected to show a decline, with manufacturers in the oil and gas sector having slashed their budgets recently due to falling oil prices. Also on investor’s radar will be developments surrounding Greece, which will continue to influence risk appetite.

Euro – European Markets

The Euro softened against its major peers towards the close of yesterday’s trading session as Greek negotiations took a turn for the worse. Reports suggested that Germany rejected Greece’s request for a six month extension of its EU bailout deal without austerity reforms attached. Meanwhile, preliminary data from the Euro zone indicated that consumer confidence in the economy improved for February as purchasing power increased due to the oil price decline. Another report indicated that Euro zone’s current account surplus narrowed unexpectedly for December.

The single currency is trading lower against the majors this morning. Producer prices in Germany dropped more than anticipated highlighting the risks of deflation in the region. French and German manufacturing PMI’s came in below expectations, while services PMI’s in these nations rose more than anticipated. Meanwhile, the spotlight today is on the Euro area’s emergency meeting where officials will consider the proposal by Athens for extension on its loan arrangement and see if an agreement could be reached.

Other Currencies – Highlights

The Canadian Dollar, which had seen gains against the US Dollar over the past week, traded lower against the greenback yesterday, following the release of better than expected initial jobless claims in the US.

The Canadian Dollar is trading higher against the US Dollar this morning, ahead of the retail sales data for December in Canada due later today. Markets expect a dismal sales report, amid growing concerns about private sector consumption for December. Investors will keenly eye the sales report as a substantially worse than anticipated reading could prompt the Bank of Canada to take corrective action to drive a stronger recovery in the nation. In a statement earlier this month, Deputy Governor Carolyn Wilkins had hinted that the central bank could cut rates again if required. The unexpected cut in interest rates by the central bank last month had surprised markets.