Pound Sterling - UK Markets

The pound has risen over 1% on the dollar, trading above 1.49 this morning on the back of renewed optimism regarding the economy. Sterling is also trading above 1.11 on the euro and has climbed against the yen and most of its international currency partners.

UK house prices declined 0.4% in April although the pace of decline is slowing, a Nationwide survey released this morning shows. Property prices still remain on average 15% lower than this time last year. Mortgage lending data in the UK tomorrow will be an indicator of the economy moving forward, given the importance of the property sector to the economy as a whole. The GFK consumer confidence survey recently showed consumer confidence for April reached the highest level in a year. There is no further data in the UK today.

US Dollar - US Markets

The dollar is losing ground this morning against its international currency partners as exchange rates for the higher yielding currencies receive a boost from improved market confidence. The dollar has sunk over 1% against the pound to 0.66 and 1.5% on the Australian dollar to 1.35. Against the euro, the dollar is also bearish, losing 0.8% to trade in the region of 0.74.

US GDP figures released yesterday showed the economy contracted a sharp 1.6% in the first quarter of 2009. This was much steeper than expected as retail sales and exports plummeted in the midst of the economic crisis. Minutes from the FOMC meeting also released yesterday showed no changes to the Fed's monetary policy, yet noted that economic outlook had improved slightly in the last two months. Despite the negative news, shares on Wall Street received a boost on renewed optimism that the worst of the crisis may be over. Personal consumption figures, a key driver of the US economy, are released today.

Euro - European Markets

The euro has regained some of its upward momentum, gaining on most of its currency partners with the exception of the pound and Australian dollar. The euro has climbed over 0.6% on the US dollar although is struggling to break the 1.33 resistance level as pending interest rate decisions from the ECB limit investor confidence.

The German unemployment rate has increased to 8.3% in April, with 58,000 people losing their jobs in April. German GDP is expected to slump by 6% this year and the Federal government needs to raise an additional EUR12-14 billion to cover the budget deficit. The overall German budget deficit could rise to EUR70-80 billion for 2009. Better than expected profits from Spanish banking giant Santander yesterday also improved euro sentiment as the bank made a EUR 1.9 billion profit in the first quarter of 2009. The EMU unemployment rate is due out today.

Other Currencies - Highlights

The Bank of Japan voted to keep interest rates unchanged at 0.1% as the government waits to gauge the effectiveness of rate reductions on the economy. The bank has also lowered growth predictions to 3.3% for the 2009 fiscal year.

The pound has sunk against the Australian dollar this morning as a greater appetite for risk leads the Aussie to consolidate on improved market confidence. This boost in exchange rates however did not extend to the Kiwi dollar, which slumped to 56 US cents after the RBNZ reduced the base interest rate to 2.5%, a new historic low.

The Canadian dollar has climbed 1.2% on the US dollar this morning on the back of improved economic sentiment moving forward. Canadian GDP figures and industrial product price is due out today.