Pound Sterling - UK Markets

Sterling exchange rates have declined this morning following weak GDP figures released yesterday. The pound is currently trading at 1.65 on the dollar and 1.16 against the euro while weakening against the Canadian, Australian and New Zealand currencies.

The substantial downward revision to UK growth rates yesterday led sterling currency exchange rates lower against its international currency partners. The ONS announced that the UK economy entered recession in the second quarter of 2008, earlier than previously estimated making it likely that the recession will last a full year. The government sector is still the only sector of the economy growing. This morning however, the manufacturing sector PMI has climbed to 47.0, indicating the pace of recession is slowing and combined with positive results in the eurozone, this could stimulate risk appetite today. Sterling exchange rates are also likely to be influenced by US labour market data later in the week.

US Dollar - US Markets

After strengthening throughout the day yesterday, US currency exchange rates have weakened this morning against the euro, Australian and Canadian dollars. However the greenback has gained ground on the yen, pound and New Zealand currencies as investors remain uncertain about the rate of economic recovery.

US foreign exchange rates received a boost yesterday as consumer confidence data was worse than expected and Federal Reserve board member Yellen gave a dovish speech warning that recovery could be "frustratingly slow" with deflation a threat to the US economy. A series of data is released in the US today including pending home sales, mortgage applications and employment change figures for June. The official unemployment rate and average earning figures will affect currency exchange rates later in the week.

Euro - European Markets

Euro currency exchange rates are stronger across the board this morning as the single currency has gained on its Asian and European currency partners with the exception of the South African rand and Canadian dollar.

German retail sales have risen 0.4% on the month with the manufacturing PMI for June climbing to 40.9. Across the eurozone, the manufacturing PMI has climbed to 42.9, up 2 points from the previous month, indicating that the decline in the manufacturing sector is moderating. This could have a positive affect on euro exchange rates throughout the day. Today is light for eurozone data with the ECB interest rate decision, official unemployment rate and producer price index likely to cause some currency volatility tomorrow.

Other Currencies - Highlights

Better than expected results from Asian economies overnight show the pace of recession is also moderating in Asia. South Korean exports are declining at an annual rate of 11%, while the Chinese manufacturing PMI rose to 53.2, indicating a rise in manufacturing levels for the fourth consecutive month. This drove Chinese stocks higher and boosted currency exchange rates for the commodity based South African and Australian economies.

Australian retail sales rose 1% in May, more than twice as much as estimated as the government slashed interest rates and increased cash handouts to stimulate spending in the economy. Australia, along with India and China has been one of the few economies to grow in the first quarter of 2009. Today the Australian dollar is exchanging at higher levels on the back of the rise in retail sales.