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UK retail sales slowed more than expected in February though retailers are expecting a small recovery next month according to the Confederation of British Industry’s report yesterday. Monthly distributive sales fell to 13 in March from 23 in February. Economists had predicted a reading of 15.

“Despite not matching the strength seen in February, it is encouraging that high street sales have continued to grow this month,” said Andy Clarke, chairman of the survey panel. However, Clarke warned that trading was unlikely to be easy over the coming months.”The outlook for Easter may still be positive, but with a weak economy and pay freezes for many, consumers are likely to remain cautious for some time,” he said.

All eyes will be on the UK later today as Prime Minister Gordon Brown’s government unveils the annual budget. Chancellor Alistair Darling has reiterated there will be “no giveaways” ahead of the general election. The Pound has had its worst annual start in the currency market in 13 years, dropping 7% against the US Dollar since January. The currency has been weakened by uncertainty regarding the outcome of the general election which Prime Minister Gordon Brown must call by June. The government was forced to borrow heavily during the recession resulting in one of the highest deficits in Europe.

Mr. Darling has said that while there had been signs recently that the economy was improving, with unemployment falling and government borrowing lower than forecast there was still a lot of uncertainty. The budget is expected to focus on encouraging private sector investment and securing long term economic growth. The government plans to halve the budget deficit – which at 12.6% is one of the highest in Europe- over the next four years.

He said “the mood of the times is not for giveaways. People are not daft, they know perfectly well we need to get borrowing down and secure (economic) recovery”.

In the Euro Zone the weaker Euro is predicted to have boosted German exports ahead of the German Ifo Business Climate survey today. The index is expected to have increased to 95.8 from 95.2 in February. Warmer weather is also expected to have led to a resumption in consumer spending and construction.

Greece’s fiscal crisis has contributed to the Euro’s 10% drop against the US Dollar in the last four months making German exports more competitive outside the Euro Zone. Bundesbank President Axel Weber has said that the EU’s largest economy may contract in the first quarter before rebounding in the second.

The EU summit to be held in Brussels tomorrow and Friday is expected to center around finding a resolution to the Greek debt crisis. Yesterday a German Finance Ministry official told reporters in Berlin that Germany and France agreed to back an IMF role in any aid for Greece. The shift, made before start of the summit, came a week after Euro-area finance ministers had agreed to a European framework for a bailout.

In Canada foreign investment rose more than expected in January to CAD 11.83bn (USD 11.71bn) from CAD 11.4bn in December. But the Canadian Dollar depreciated against its American counterpart for the first time in thirteen days as crude oil prices, the nation’s biggest export fell. On Wednesday and early yesterday the Loonie traded within one cent parity with the US Dollar before dropping 0.23% from its opening to close the day at USD 1.0131.

However yesterday’s setback looks set to be temporary as the Canadian Dollar has gained 6% against the US Dollar over the past three months, in part because of the oil-rich nation’s plans to erase its budget deficit by 2015 and the prospects of a quick recovery that may prompt the Bank of Canada to raise interest rates. Later today Canadian monthly retail sales figures as well as the consumer price index numbers are due to be released.

Finally in Europe Greek Prime Minister George Papendreou has given EU leaders a one week deadline to come up with a concrete rescue plan for Greece and he has challenged Germany to abandon its doubts about any such rescue package. Papandreou said he may turn to the International Monetary Fund to overcome Greece’s debt crisis unless leaders agree to set up a lending facility at a summit due to be held on March 25th and 26th. The IMF option has already been dismissed by European Central Bank President Jean-Claude Trichet and French President Nicolas Sarkozy, who say it would only demonstrate that the EU can’t solve its own crises. Signs that the uncertainty in the Euro Zone is far from over caused the Euro to tumble 0.85% against the US Dollar yesterday; it closed trading at $1.3617 in the forex online market. It slid against 15 of its 16 major peers this week and looks set to have made its biggest weekly loss since the start of February by close of trade today.

Later this morning the German Purchase Price index is due to be released. After an unexpectedly strong rise of 0.8% last month, double the expectations, it is expected to gain 0.1% this month. Also this morning, President of the European Central Bank, Jean-Claude Trichet is addressing the European Commission in Brussels. His comments will be closely watched for any indications that European leaders are getting closer to a unified resolution on an assistance package for Greece.

Last week ended with Friday’s release of the University of Michigan preliminary Consumer Sentiment Index. This revealed that confidence among U.S. consumers unexpectedly declined in March, for the second month in a row. This is a strong signal that Americans are discouraged about the labor market. The prelim CSI fell to 72.5 from February’s final reading of 73.6. Economists had previously predicted that the index would increase to 74.

A separate report from the Commerce Department in Washington, also on Friday, showed that the U.S. retail sales report for February was better than expected. However, downward revisions to January sales numbers poured cold water on the result. Retail sales increased 0.3% in February and while stronger than the 0.2 percent decrease projected by economists, figures for the prior two months were revised down. January sales were revised downward to 0.1% overall.

Bucking the overall bearish trend in the forex online market, the USD and the JYP rose late last week amid concerns that tensions between America and China will continue to escalate boosting demand for the two currencies as a refuge. The increase came after Chinese Premier Wen Jaibao continued to insist last week that the Yuan is not undervalued. Japan’s yen strengthened versus 10 of its 16 major counterparts closing trading on Friday at 90.54 against the Dollar having opened the day at 90.60.