Pound Sterling - UK Markets

Sterling currency exchange rates are stronger against the US dollar this morning, trading at 1.64 although the pound has weakened against the euro to 1.16. Sterling has also declined against the yen, Australian dollar and other European currency partners.

The BRC noted that retail sales rose again in July, rising 1.8% from the previous year. The growth has been driven by rising furniture and homeware sales, though high unemployment levels continue to limit consumer confidence. Trade statistics this morning show the goods trade balance sunk to GPB-6.5 billion in June, while the total trade balance came in at GBP-2.81billion. Average earning and unemployment figures are due in the UK tomorrow.

US Dollar - US Markets

US dollar currency exchange rates climbed overnight against the pound and euro, though the dollar has pared these gains this morning, currently trading at 0.70 versus the euro and 0.60 versus the pound.

Non-farm productivity figures are due today and these are expected to show bolstered productivity as employers fight to stave off the effects of recession. The greenback has continued to rally against the euro and economists are speculating that growing market optimism could be affecting the dollar's relationship with risk. The USD has advanced on the back of positive US data recently and this could suggest an end to slavish safe haven trading.

Euro - European Markets

Euro currency exchange rates are higher this morning, with the single currency gaining on its Asian and European currency partners. The euro is currently valued at 0.86 versus the pound and 1.41 against the US dollar.

The German consumer price index is unchanged for July, while the wholesale price index declined by -0.5%. This is the first annual fall in prices for 22 years as rising unemployment curbed spending and lower energy prices helped to reduce inflation. Economic recovery in the eurozone is expected to lag behind the US and UK. Industrial production figures are due tomorrow.

Other Currencies - Highlights

The Bank of Japan opted to leave interest rates on hold at 0.1%, citing significant risks to the economy. Governor Shirakawa also stated that recovery is likely to be weak following the withdrawal of government stimulus. Currency exchange rates for the yen rose against the US dollar following the decision.

Consumer inflation in China fell by -1.8% over the last year, with the producer price index falling by -8%. Retail sales have remained steady, rising by 15% in the last year. However, industrial production and export levels came in worse than expected, prompting speculation that China's recovery is yet to find a foothold.