Pound Sterling - UK Markets

The trend in sterling currency rates remains neutral this morning with the pound trading at 1.65 against the US dollar and 1.16 against the euro. The pound has also gained 0.3% against the yen and is up slightly against the Canadian dollar.

Sterling lost nearly a cent against the euro yesterday after the MPC minutes showed the Bank of England was split on its quantitative easing policy. CBI distributive trades also came in slightly worse than expected at -54. This morning's figures show retail sales rose 0.4% last month and 3.3% on the year, while public sector borrowing is running at GBP8 billion. The US leading index could be a source of volatility for the pound later in the day.

US Dollar - US Markets

Currency rates for the US dollar are mixed this morning as the greenback climbed against the yen and pound while declining against the euro and Asian currency partners. The US dollar is currently trading at 0.70 versus the euro and 0.60 versus the pound.

The US leading index is released today and positive figures are expected to show the recession is drawing to a close. Recent figures show evidence of stock building, higher export levels and fewer job losses, though economists are quick to point out that there remain a number of large barriers to sustainable recovery, most notably unemployment which is set to reach 10%. The Philadelphia Fed is also released today and this will provide and important snapshot of the manufacturing industry.

Euro - European Markets

Euro currency rates rose this morning after a volatile day in equity markets yesterday. This morning the single currency is marginally higher against the pound, US dollar, Canadian dollar while declining against the Australian and New Zealand currencies.

European stocks have recovered this morning which could boost euro sentiment today. The ZEW survey for Switzerland came in better than expected at 18.6, and the trade surplus rose to CHF2.5billion. There is little data out in the eurozone today, with euro currency rates likely to be affected by the US leading index released this afternoon.

Other Currencies - Highlights

Currency rates for the Japanese yen fell against the euro and dollar overnight as a rebound in Chinese stocks improved risk appetite. The South African rand and South Korean won gained the most against the yen as higher yielding currencies rallied, boosted by optimism over global recovery.

Australian and New Zealand currency rates are lower this morning against the pound and US dollar, despite rebounding stocks in China. The Australian central bank has made a record AUD sale based on the view that foreign exchange markets are stabilising. The AUD has gained 18% against the US dollar and is currently trading at 1.20 per US dollar.