GBP

Data from the UK yesterday showed that UK services output
dipped slightly in February from January but nonetheless business activity was
still expanding.

Looking at the data in more detail, orders in the sector
rose quicker than expected and optimism about UK services, which makes up 70%
of the UK economy, rose to its highest level in 4 ½ years.

Overall the data pointed to UK GDP for the first quarter of
2014 matching that of the fourth quarter of 2013 and thus coming in at 0.7%.

GBP

Data from the UK yesterday showed that UK services output
dipped slightly in February from January but nonetheless business activity was
still expanding.

Looking at the data in more detail, orders in the sector
rose quicker than expected and optimism about UK services, which makes up 70%
of the UK economy, rose to its highest level in 4 ½ years.

Overall the data pointed to UK GDP for the first quarter of
2014 matching that of the fourth quarter of 2013 and thus coming in at 0.7%.

The pound rallied off the back of the data with notable
gains of around 0.4% against US dollar, euro, Japanese yen and UAE dirham.

EUR

Business activity in the Eurozone expanded at its fastest
pace since 2011 with growth led by the single bloc’s services sector.

Service sector figures from Germany, Italy, Spain and France
all expanded beyond expectations as well as surpassing the same data in
January.

The data suggests that we would well see Eurozone GDP for
the first quarter of 2014 showing 0.4-0.5% growth. Thus we could see further
economic growth in the Eurozone, as fourth quarter economic growth in 2013 was
confirmed at 0.3% yesterday morning.

Adding to this retail sales for the month of January came in
higher than expected at 1.6%, surpassing the fall of 1.3% in December.

Despite the positive data, euro strength was muted. This is
not a surprise given that this afternoon we have the European Central Bank’s
monetary policy statement.

USD

Data from the US largely disappointed as US service sector
figures showed a dip in activity from 54 to 51.6 for the month of February.

Also ADP payroll figures revealed that only 139,000 jobs
were added in February, below an expected addition of 160,000 jobs.

As a result the US dollar weakened as once again the data
presents an arguments that perhaps the Fed may wrong to continue to taper their
quantitative easing program at US$10bn per month.

CAD

The Bank of Canada left
interest rates on hold at 1% yesterday in what was an anticipated decision.

The Central Bank added that economic
growth in the fourth quarter of 2013 was slightly stronger than anticipated,
adding that it still expects growth of 2.5% in 2014.

However, the bank also said
inflation is expected to remain well below target for some time and the direction
of the next change to interest rates will be dependent inflation.

Today

In focus today will be the
European Central Bank monetary policy statement this afternoon. With deflationary
pressures still persisting in the Eurozone, all eyes will be on what Mario
Draghi and the ECB may look to do to combat this.

There have been calls for the
ECB to lower interest rates further, but at this stage this looks to be
unlikely. Instead an option for the ECB could be to look to end sterilisation of
the bond purchases under the bank’s Securities Markets Programme. This would
release around €175bn into the Eurozone financial system, doubling the amount
of excess liquidity which as a result would bring down overnight lending rates
and thus as a result this could weaken the euro.

US job data will be in focus
this afternoon as the number of people filing for jobless claims is expected to
fall from the previous week, which could well strengthen the US dollar.

The Bank of England are also
expected to release their latest interest rate decision, which is expected to
remain at 0.5%.

Key Announcements:

11.00am – EUR – German
Factory Orders (Jan): Expected to show a fall of 0.3%.

12.00pm – GBP – BoE Interest
Rate Decision: Expected to remain at 0.5%.

12.45pm – EUR – ECB Interest
Rate Decision: Expected to remain at 0.25%.

13.30pm – EUR – ECB Monetary
Policy Statement.

13.30pm – USD – Initial Jobless
Claims (Feb 28): Expected to drop to 336,000