Ahead of Thursday’s interest rate decision by the European Central Bank (ECB), today’s ZEW sentiment in the Euro zone and Germany will be eyed by investors for clues on the state of the economies. On the data space, seasonally adjusted current account surplus in the Euro zone narrowed sharply in February, driven by surpluses for goods, services and primary income, which were partially overshadowed by a deficit in secondary income.

In the UK, the economic calendar is void of any crucial macro data today. Investors will look forward to a speech by the Bank of England’s (BoE) Governor, Mark Carney, for further inputs over the Brexit referendum. Later today, investor focus will be on the US housing starts which are poised to slightly decline, while the nation’s building permits are anticipated to tick higher.

Pound Sterling – UK Markets

The Pound is trading on a firmer footing against the US Dollar and the shared currency this morning amid a constant risk-on sentiment. The Pound - US Dollar currency pair is trading above the crucial 1.43 mark as trading in the greenback remains subdued due to uncertainty arising over the interest rate increases this year. Meanwhile, a recent poll on Britain’s exit from the European Union (EU) saw voters shifting their stance from favouring the Brexit to remaining in the EU after the UK treasury revealed that an exit could lead to substantial rise in costs to the household by 2030.

Looking ahead, the UK data docket remains absolutely empty this session and hence focus turns towards a speech by the BoE Governor, Mark Carney. Investors keenly await further insights into the Brexit referendum and further clarification on the central bank’s decision to stay put on its interest rates and asset purchase programme. Meanwhile, investors will eye economic releases in the US including housing starts and building permits for March.

US Dollar – US Markets

The greenback traded lower against the Pound and the shared currency in yesterday’s session, as investors continued to contemplate the US Federal Reserve’s (Fed) stance on increasing interest rates further. There appeared to be a clear divide in comments made by top two Fed officials. The New York Fed President, William Dudley, stated that although US economic conditions are “mostly favourable”, the central bank will remain cautious with raising interest rates as global economic threats loom large. On the other hand, the Boston Fed President, Eric Rosengren, indicated that the Fed is set to raise interest rates more rapidly than investors currently expect. On the data front, the NAHB builder sentiment gauge held steady in April, suggesting a moderately upbeat mood in the industry for the third consecutive month.

Moving ahead, housing starts and building permits for March are due for release later today. The report on new housing construction is expected to show a slight decline from its previous month’s level, but will keep the upside trend alive, while building permits are expected to climb.

Euro – European Markets

The shared currency is trading on a stronger footing against the US Dollar this morning. Later today, investors will eye a survey by the ZEW, which is anticipated to show that economic sentiment in the Euro zone improved in April following a drop in the previous month to its lowest level since November 2014. Additionally, another survey by the ZEW scheduled later today might indicate that economic sentiment in Germany improved for a second consecutive month in April. Often, this data only has a modest influence on the direction in the Euro against its peer currencies, however, it will provide enough evidence about the state of the Euro zone economy ahead of the ECB’s interest rate decision later this week.

Yesterday, the publication of the German Bundesbank’s monthly report revealed that the largest economy of the Euro zone continued to grow in the first quarter on the back of robust domestic demand. However, it also added that economic growth might tick lower in the second quarter due to declining factory orders and weakening sentiment.

Other Currencies – Highlights

The Australian Dollar recovered from its previous session losses and reached a 10-month high this morning after oil prices rebounded from yesterday’s slide; a strike by oil workers in Kuwait slashed the nation’s output by about 1.7 million barrels per day. Early this morning, the Reserve Bank of Australia (RBA), in the minutes of its latest policy meeting, reiterated that there is further scope for easing if it's needed to boost the nation’s economy. Meanwhile, the minutes also cautioned that the appreciating exchange rate could complicate progress in activity rebalancing towards the non-mining sectors of the economy. However, uncertainty over an interest rate rise in the US has continued to weigh on the US Dollar following comments from several key Fed officials indicating a cautious and gradual approach.

Later in the day, investors keenly await a speech by the RBA Governor, Glenn Stevens, which will provide further clarification on the minutes of the central bank’s monetary policy meeting.