Pound Sterling - UK Markets

Sterling currency rates remain at the top end of recent ranges this morning, boosted by optimism that the UK may be beginning to emerge from recession. Sterling is currently trading at 1.69 against the US dollar, 1.17 against the euro and 1.81 against the Canadian dollar.

Unexpected signs of recovery emerged in the UK yesterday, with house prices, the service sector and manufacturing output all showing positive results. This triggered a rally in sterling currency rates, sending the pound higher against its international currency partners. The Bank of England is expected to leave interest rates on hold at 0.5% for the fifth consecutive month today, but may vote to extend its QE programme by up to GBP25 billion. The decision is announced at noon. 

US Dollar - US Markets

Currency rates for the US dollar are virtually unchanged this morning against the euro and pound, trading at 0.69 and 0.58 respectively. The greenback has dipped slightly against the Canadian and Australian dollars. 

US factory orders rose by 0.4% in June, sending the dollar to a 10-month low against the pound yesterday as optimism led to improved appetite for risk. The US service sector posted more job losses than expected in June and labour market data will continue today with the release of initial jobless claims. 

Euro - European Markets

Euro currency rates are mixed this morning, trading within narrow ranges ahead of the ECB interest rate decision due this afternoon. The euro is currently trading at 1.43 against the US dollar and has slipped to 0.84 versus the pound.

Eurozone retail sales fell unexpectedly in June by -0.2%, in opposition to the 0.2% rise markets were expecting. France's largest bank Societe Generale, posted a 52% profit drop for the second quarter which slightly rattled confidence in the euro yesterday and today the Swiss consumer climate index has come in worse than expected. The ECB rate announcement will be followed by a press conference this afternoon that will provide an insight into the mindset of the ECB and likely affect euro exchange rates.

Other Currencies - Highlights

The Chinese central bank has warned overnight that monetary easing could give rise to 'severe' inflation and disrupt market stability in future. As signs that the recession is abating begin to show, the debate over quantitative easing, government debt and exit strategies is likely to be of increasing importance to markets and foreign exchange rates.

Currency rates for the Australian dollar have pared gains overnight, retreating from a 12-month high against the US dollar. This morning the Australian unemployment rate came in at 5.8%, better than the 6% expected by markets although in the context of interest rate decisions this has failed to move the AUD significantly. RBA economic forecasts are released overnight and these are expected to show improved growth forecasts with an outline for tightening monetary policy.