• EUR/GBP +0.6%
• GBP/JPY -0.6%
• EUR/CAD +0.4%

EUR/GBP

CBI Disappoints, Lends To Euro Strength: Pound weakness turned into euro strength as bidders returned to lift the EURGBP currency cross.  Continuing off of the 0.6880 support established yesterday, the cross rose higher through the 6900 handle as weakness in UK retail sales sparked off the interim rally.  According to the Confederation of British Industry trades survey, retailers continued to report lower sales volumes over the month.  Posting a negative 18 in the previous month, the survey posted a negative 16 reading for the month of March.  Although it is an improvement from the previous low, the figures remain suggestive that consumer activity continues to be weak compared to the pace of growth seen in the housing and manufacturing sectors.  Additionally, it still leaves the specter of potentially lower benchmark rates in the near term looming over the market.  Rising consumer lending, weaker alternative mortgage approvals and a wider account deficit also weighed on the sterling during the session as it serves as potential infrastructure weakness.  Although tomorrow's nationwide prices report could lend to some pound strength, continued optimism in the euro region surveys look boost the cross in the near term.

GBP/JPY

Retail Sales Rises In Japan: With pound weakness in the air, bidders bid the major lower against the Japanese yen as retail trade was slightly better than expected. Although not positive for the month, the data suggests that improvement remains continuous.  According to the Ministry of Economy, Trade and Industry, retail sales rose on the annualized comparison by 1 percent. Initially estimated to rise 0.8 percent, the figure was bolstered by higher wage earnings and reinforced confidence by the consumer as retailers benefited in the month.  Notably, higher automobile sales and an increase in energy prices helped the figure rise.  On the monthly comparison, the figure declined less than expected, dipping 1.5 percent.  The figures contribute to overall optimism that central bankers are heavily considering a rate increase in the near term as inflationary pressures rise on an economic recovery in the world's second largest economy.  Adding to the notion was continued strength in the export market.  Remaining strong and positive, machine tool orders rose 5.6 percent in the month of February.  With both domestic demand and exports strong, near term demand for yen should be bolstered once the interest rate dynamic fades.

EUR/CAD

Technical Bidding for Euro: No mention of interest rates by Bank of Canada Governor David Dodge sparked euro bidding on the session ahead of Friday's gross domestic product report.  However, with more optimism likely to be spurred by near term European economic reports, bidders favored the regional single currency.  The rise comes as a mild surprise considering crude oil contracts were bid higher on the session.  Rising over the $66 a barrel mark, demand jumped for light sweet contracts as inventories in the U.S. declined according to the most recent Energy Department report posted today.  Coupled with supply concerns over situations in Iran and Nigeria, the report sparked the break of the recent $59-$65 range that has been keeping prices contained.  Looking ahead weekly earnings for the Canadian economy should stop the bleeding should the report print increases in wages.  Higher wages contribute to overall inflation and may instigate further speculation over the upcoming decision.

Richard Lee is a Currency Strategist at FXCM.