Pound Sterling - UK Markets

Sterling foreign exchange rates have continued to capitalise on last week's rally this morning, breaking out of recent ranges to trade at USD1.68 and EUR1.18. The pound has also climbed against the yen, Australian and New Zealand currencies. 

Better than expected US GDP figures boosted risk appetite late last week, sending sterling foreign exchange rates higher against the safe haven currencies. UK consumer confidence figures also showed a rise in July and this morning Barclay's has announced an 8% profit rise for the first half of the year. The UK manufacturing sector PMI has climbed to 50.8 in July, expanding for the first time since March 2008. This week foreign exchange markets will be interested in the Bank of England interest rate decision.

US Dollar - US Markets

Foreign exchange rates for the US dollar have weakened this morning against all but the safe haven currencies due to the recent rally in risk appetite. The US dollar is currently trading at 0.59 against the pound and 0.70 against the euro, while sinking to a 10-month low against the Australian and New Zealand currencies.

US GDP figures released on Friday showed an annual 1% decline in economic growth. As the smallest contraction in four quarters this was taken as positive news by investors, reviving hopes that the world's largest economy could return to growth in the second half of 2009. US construction spending figures are out today with personal consumption figures likely to cause some volatility later in the week.

Euro - European Markets

Foreign exchange rates for the euro are largely stronger this morning, rising against the yen, US dollar and other European currencies. Increasing risk appetite has also seen the euro fall against the pound, Australian and Kiwi dollars.

European stocks rose this morning following news that Barclays and the European arm of HSBC posted a profit in the first six months of 2009. PMI figures this morning show the European manufacturing sector contracted less than expected in July, with the index rising to 46.3. In combination with the UK announcing a modest expansion in manufacturing, this triggered optimism over the state of European economies. The ECB is also due to make an interest rate decision this week and this could lead to further currency volatility.

Other Currencies - Highlights

Foreign exchange rates for the Australian and New Zealand dollars have risen to their highest level in 2009 on the back of market optimism over recovery. The Aussie and Kiwi have also recorded their longest stretch of gains since 2004 against the US dollar. Housing and retail statistics are due in Australia today and these could provide fuel for further gains. The AUD is currently trading at GBP0.49 and USD0.84.

The Canadian economy contracted in May for the 10th consecutive month as falling manufacturing and exports plunged the economy deeper into recession. This morning however, Canadian foreign exchange rates have received a boost from a revival in risk appetite and the Canadian dollar has climbed to USD0.93.