Pound Sterling - UK Markets

Sterling exchange rates are lower against its international currency partners this morning as risk appetite takes a hit due to the release of substantial economic data today. The pound is currently exchanging at 1.63 against a stronger US dollar and 1.16 against the euro.

An increasingly complex economic picture is emerging in the UK, contributing to uncertainty in foreign exchange markets. This week, first quarter GDP figures have been distinctly negative, yet PMIs for the service and manufacturing sectors have shown positive results. In the latter half of 2009, employment data is expected to lag along with GDP, yet survey data is likely to improve as business and consumer confidence rises with the view that recession is bottoming out. At present, many economists are predicting the pound could experience upward momentum against the euro and dollar in the medium term, while declining against industrialising nations such as the BRIC group. The next MPC meeting is next Thursday.

US Dollar - US Markets

US dollar exchange rates have strengthened this morning as investors seek out safe haven currencies with the release of major economic data in the US. The dollar is currently trading at 0.61 against the pound and 0.70 against the euro, while also rising against the Australian, New Zealand and Canadian dollars.

With US markets closed for a public holiday on Friday, unemployment data, non-farm payrolls and average hourly earnings have been moved forward to be released today. These are likely to affect international currency exchange rates as the figures are integral to consumer and economic confidence. At present, questions over the sustainability of recovery are being raised by economists with many now suggesting the recession could take a 'W' shape rather than the more traditional 'V'. The priority for governments and central banks is to ensure recovery is sustainable before raising interest rates again.

Euro - European Markets

Gains in euro exchange rates have been capped this morning as investors look towards the ECB interest rate decision this afternoon. At present the single currency is trading at 1.41 against the US dollar and 0.86 against the pound, while gaining on the rand, Australian and Kiwi dollars.

This morning's data shows the EMU unemployment rate is running at 9.5%, having risen 0.3% in May due to economic downturn in the eurozone. The producer price index has also declined by -0.2%, the largest drop on record, taking the annual rate of deflation to -5.8%. The ECB interest rate decision is due today and while markets are expecting little change from the 1% base rate, these figures could give the ECB room for thought. Yesterday PMIs across the eurozone were better than expected, boosting hopes of recovery along with currency exchange rates. Today, the euro has weakened following unemployment data and the pending ECB decision. 

Other Currencies - Highlights

The Australian trade deficit has widened to AUD556 million as coal exports reached a 14-month low and prices for iron ore declined. The Australian economy has strengthened in recent years on the back of a mining boom though recently, recession has reduced demand for commodities, lowering prices and export levels. At present Australian dollar exchange rates are weaker against its international currency partners as markets look to US markets. The RBA interest rate decision is due on the seventh of July.