Pound Sterling - UK Markets

Sterling foreign exchange rates have dropped off sharply against the US dollar and euro this morning, falling to 1.64 and 1.16 respectively. The pound is also lower against its European currency partners, while gaining against the New Zealand and Australian dollars.

UK unemployment has reached its highest level since 1995, with figures rising to 2.44 million. Average earnings also grew at the slowest rate on record and this could lead to downbeat sentiment in the UK today. The GBP0.3 billion widening of the UK trade deficit failed to move sterling exchange rates significantly yesterday. There was however, a rise in exports to the European Union which was taken as a good sign by investors. Minutes from the last MPC meeting are released later in the day.

US Dollar - US Markets

Foreign exchange rates for the greenback have gained ground in early trading this morning, climbing against its international currency partners with the exception of the Japanese yen and Swiss franc.

The Federal Reserve is due to make an interest rate decision today, and this will likely influence US dollar sentiment. The Fed is expected to leave interest rates and QE policy unchanged, with a bias towards flexibility and further monetary easing if necessary. The US trade balance is also released and the deficit is expected to widen to USD-28 billion.

Euro - European Markets

The euro has experienced choppy trading this morning with foreign exchange rates falling to 1.41 against the US dollar and 0.85 against the pound. The single currency has gained on the Aussie, Canadian and New Zealand dollars.

Industrial production across the eurozone has fallen -0.6% in June, declining by -17% for the year. The low figures reflect a contraction across all sectors of the 16 nation zone, although the decline is progressing at a slower pace than in recent months. Euro exchange rates will be affected by the Fed decision today and euro area GDP figures released tomorrow.

Other Currencies - Highlights

Latin American foreign exchange rates are lower this morning, with the Mexican, Colombian and Brazilian currencies falling to August lows on the back of downbeat economic data from China and risk averse trading ahead of the US interest rate decision. US trade balance figures could also have implications for the real in particular, as the Brazilian economy is reliant on commodity exports.