Pound Sterling - UK Markets

Sterling currency rates gained ground yesterday following strong UK inflation figures, although the pound has trimmed gains this morning following the release of MPC minutes. The pound is currently trading at 1.63 against the US dollar and 1.16 against the euro.

The MPC minutes revealed the Bank was split on quantitative easing, with governor Mervyn King intent on adding a further GBP75billion to the economy rather than the GBP50 billion that was added. This shows the committee are split on how deep recession is and how much it will take to recover. There is no major data in the UK today with retail sales released tomorrow.

US Dollar - US Markets

Currency rates for the US dollar rose this morning, climbing to 0.70 against the US dollar and 0.61 against the pound. The US dollar is also higher against its major Asian and European currency partners, with the exception of the Japanese yen.

The greenback received a boost yesterday after US producer prices came in weaker than expected. The PPI fell by 0.9% in July, with an annual decline of -6.8% indicating deflationary trends in the US economy. Building starts in the US increased for the fifth consecutive month, illustrating further stabilization in the US property sector and new housing permits were also up. There is no major data in the US today with initial jobless claims due tomorrow.

Euro - European Markets

Euro currency rates are lower this morning against the US dollar, Japanese yen and Brazilian real as investors favour risk averse trading. The single currency has gained against the Australian, New Zealand and Canadian currencies as well as the pound.

Euro sentiment is positive at present following the results of yesterdays ZEW survey which showed German investor confidence at the highest level in three years. The euro rose to 1.41 against the US dollar, reversing multi-week lows and this morning is trading at 1.40. Figures for construction output show a -1.1% contraction in June, an improvement from -2% the previous month. There is no further data due today.

Other Currencies - Highlights

The Brazilian real has gained this morning following news that the economy added jobs at the fastest pace this year. 138,402 new jobs were registered in July, ahead of market expectations for 105,000 adding to the view that Brazil has emerged from its first recession since 2003. GDP predictions are for a 3% expansion in the second quarter and real currency rates have gained against the euro and pound.

Australian and New Zealand currency rates fell 0.5% against the US dollar overnight, led lower by a decline in Chinese stocks. The AUD slid back after reaching USD0.83 and also fell against the yen while the New Zealand dollar dipped to USD0.67.