Pound Sterling - UK Markets

Sterling foreign exchange rates are mixed this morning, climbing against the US, Canadian dollar and Brazilian real while declining against its European currency partners. The pound is currently valued at 1.63 against the US dollar and 1.16 against the euro.

UK unemployment has climbed to 2.38 million after the biggest quarterly increase on record. ONS statistics show unemployment rose by 281,000 in the three months until May, taking the official rate to 7.6% which is the highest in 10 years. Unemployment in both the US and eurozone is running at 9.5%. Inflation figures yesterday saw the pound strengthen as they added to the view that the Bank of England has room to leave interest rates on hold. There is no further data in the UK today. 

US Dollar - US Markets

The US dollar has dropped sharply against the euro this morning, falling 0.6% to 0.71 after the publication of euro inflation figures. The greenback has also weakened against its international currency partners as investors diversify following the equity rally yesterday.

Today US markets are packed with data that will provide a current picture of the US economy and likely affect international foreign exchange rates. US consumer price inflation is due, along with industrial production figures which are expected to decline by -0.9%. This is given the lower number of auto assemblies following the massive downturn in GM and the Chrysler bankruptcy. The FOMC minutes are also due today and this will provide an insight into the Fed's view of the economy at present.

Euro - European Markets

Euro foreign exchange rates have climbed this morning, breaking through the 1.40 level against the US dollar and rising to 0.85 against the pound. The euro is also stronger against its European currency partners as investors seek an alternative reserve with important US figures due this afternoon.

Consumer prices in the eurozone have fallen for the first time in June, dropping 0.1% from the previous month due to a decline in energy prices and reduced household spending. Despite the falling inflation Eurostat figures show none of the Eastern European nations set to join the eurozone have inflation rates low enough to do so. The maximum current rate for joining the eurozone is 2.6% at present. There is no further data in the eurozone today.

Other Currencies - Highlights

The Bank of Japan has left interest rates unchanged at 0.1% but voted to extend emergency credit programmes until the end of the year to help businesses ride out the recession. Governor Shirakawa said the financial conditions are improving in Japan although confidence remains low and the economy is due to shrink 3.4% this year. Yen foreign exchange rates have weakened overnight as global confidence improves.

China's GDP statistics for quarter 2 are out this afternoon. As a key market for commodities and exports, continuing Chinese growth is integral to global economic recovery. Foreign direct investment in China has fallen for the ninth month straight as companies trim budgets to weather the recession.