The just published report by Markit indicated that activity in the UK services sector slowed more than estimated in April and reached the lowest level since February 2013. Meanwhile, concerns over the soon approaching Brexit referendum and recent polls supporting an exit from the European Union (EU) continued to weigh on the local currency. With no major economic releases scheduled in the Euro zone, an economic bulletin by the European Central Bank (ECB) will be eyed by market participants.

Speeches by several US Federal Reserve (Fed) officials scheduled later in the day will attract significant market attention. Investors will closely watch for further hints over the central bank’s stance on the interest rate decision. In economic news, investor focus will be on the number of persons applying for first-time unemployment benefits in the US.

Pound Sterling – UK Markets

The just out data showed that a gauge of services in the UK for April dropped more than expected to its weakest level since February 2013, as companies feel the heat ahead of the upcoming EU referendum. The services sector was hurt mainly due to delayed contracts, a slowdown in employment and weak outlook.

Yesterday, Sterling fell to its lowest level against the US dollar in almost a week, after the UK’s construction PMI rose at its slowest pace in almost three years in April, adding to fears that the economy is losing momentum. The report came just a day after a similar survey showed that Britain’s manufacturing activity entered into contractionary territory in April. However, the Pound briefly recovered and moved above the 1.45 mark after the release of a disappointing US employment report. Separately, the latest event that further weighed on the Pound is a recent poll which showed that the UK is now equally divided on the question of whether Britain should stay within the EU. Earlier, Britons appeared less inclined to permit a so called Brexit.

US Dollar – US Markets

The US Dollar extended its rally for the second consecutive day against the Pound and the shared currency yesterday. Economic data released yesterday painted a mixed picture of the US economy. The services sector picked up more pace in April, indicating that service providers will continue to support the nation’s modest economic growth. The final Markit services PMI registered its highest reading since January this year, while the latest ISM non-manufacturing data came in stronger than expected. However, the nation’s growth outlook dimmed after a separate report showed that private employers in the US hired the least number of workers in three years in April, as firms remained hesitant to hire given the recent slowdown in the nation’s first quarter growth. In other economic news, the US trade deficit declined to a 16-month low level in March, as imports plummeted to their lowest level since 2010.

Next on the radar is the weekly jobless claims data, due for release later today, along with speeches by a few US Fed officials.

Euro – European Markets

The shared currency recorded losses against the US Dollar for a second straight session yesterday, following the release of below-par Euro zone retail sales data for March. Retail sales, a proxy for household spending, declined for the first time in five months, highlighting the region’s struggle to stave off deflation and regain its foothold. On a monthly basis, the largest drop was recorded in sales of food, drinks and tobacco products. Additionally, services PMI in the Euro zone and Germany was revised downwards in April. France in particular received a double blow with the services PMI being revised downwards after its manufacturing sector entered a contractionary territory in April, thus indicating stagnation in overall economic activity. Meanwhile, the European Commission indicated that the Euro zone's growth this year would be slower than previously thought and also warned of external and internal risks to the bloc's economy.

Next of note will be the ECB’s economic bulletin, scheduled for release in some time. Additionally, a speech by the ECB Vice President, Vitor Constancio, is also on tab.

Other Currencies – Highlights

The Aussie Dollar climbed from a seven-week low against the greenback this morning, buoyed by a slew of stronger than expected Australian economic data. Moreover, a recovery in oil prices is helping sustain the upbeat momentum in the commodity currency. Data released earlier during the day showed that Australia’s retail sales data exceeded market expectations for the first time in four months, indicating robust consumer confidence. Additionally, sales of new homes posted a strong rebound in March, clocking in its largest increase since January 2010. Moreover, Australia’s trade deficit narrowed to a one-year low level in March, driven by a strong growth in exports. Meanwhile in China, Australia’s largest trading partner, services PMI declined in April, putting a break on the nation’s effort to transition from a manufacturing and investment led growth to a service oriented economy.

Going ahead, Australia’s AiG Performance of Construction Index is scheduled for release overnight. In addition to this, investors will closely eye the US weekly jobless claims data for further direction in the Aussie Dollar - US Dollar currency pair.