Pound Sterling - UK Markets

Sterling foreign exchange rates are climbing this morning in response to positive inflation figures. The pound is currently trading at 1.64 against the US dollar, 1.16 against the euro and is also higher against the New Zealand, Australian and Canadian currencies.

UK inflation figures just released show inflation is currently running at 1.8%, above the market expectation of 1.5%. This is the first time consumer prices have fallen below the Bank's 2% target. The retail price index also rose to -1.4% on the year, indicating deflationary pressures on the economy are easing which should help sterling recover. The Bank of England minutes are released tomorrow.

US Dollar - US Markets

US foreign exchange rates climbed yesterday against its major currency partners as investors favoured safe haven trading. This morning however, the greenback has trimmed gains on the back of improved confidence, declining to 0.70 against the euro and 0.60 against the pound.

Despite positive growth figures from Japan yesterday, US equities took a tumble as investors began to worry that the rally in exchange rates could outpace economic recovery. The S&P sunk 2% and the greenback and yen rose with risk averse trading. Today, the US dollar has declined as positive figures in the eurozone and UK boost foreign exchange rates for the higher yielding currencies. Today housing permits, building starts and the producer price index will affect foreign exchange rates in the US.

Euro - European Markets

Euro foreign exchange rates remain firm this morning, holding ground against the US dollar and yen while slipping against the pound, Australian and New Zealand currencies. The euro is currently trading at 1.41 against the US dollar and 0.86 against the pound.

The German ZEW survey released this morning shows economic confidence has risen to 56.1 in August, the highest level in three years. Confidence for the eurozone came in at 54.9. This is a large leap for the region following a surprise dip in July, supporting the view that the European economy is beginning to improve. There is no further data in the eurozone today, with current account figures released tomorrow.

Other Currencies - Highlights

Foreign exchange rates for the Australian and New Zealand dollars have rebounded from their two-week low against the US dollar, with the RBA minutes confirming that the bank will carefully balance further rate hikes against the risk of undermining economic momentum. The New Zealand producer price index is due overnight.

The Canadian currency fell to a one-month low against the US dollar yesterday as stocks and commodity prices dipped along with risk appetite. This morning the CAD has trimmed these losses, climbing to 1.10 per US dollar as commodity prices recover following positive news from Germany.