UK recovery slow
Pound Sterling - UK Markets
Currency rates for sterling are mixed this morning, as the pound has risen against the US dollar and yen, while declining against the euro, Australian and New Zealand dollars. Sterling currency rates are currently 1.64 against the US dollar and 1.15 against the euro.
GDP estimates for quarter two show the UK economy has contracted a further -0.8%. This is at odds with market expectations of a -0.3% contraction and puts the UK on track for a -5.6% contraction this year. Sterling currency rates declined following the announcement although these losses may be trimmed throughout the day. While the contraction is significantly smaller than the -2.4% last quarter, confirming that the pace of recession is slowing, economists are predicting a weak recovery with unemployment continuing to drag on growth. There is no further data in the UK today.
US Dollar - US Markets
US currency rates have declined this morning, losing 0.5% to the euro and 0.15% to the pound. The dollar is currently trading at 0.7029 and 0.6058 against the euro and pound respectively, while also losing ground to the yen and Canadian dollar.
Equity markets experienced another rally in the US yesterday and the S&P rose 2.3% on the back of healthy corporate earnings and jobless claims figures. New jobless claims in the last week rose by 554,000, roughly in line with market expectations. Existing home sales also rose by 3.6% on the month and these figures failed to disrupt trading in foreign exchange markets. Today Geithner and Bernanke of the Federal Reserve are due to testify on regulatory reform today and this will be watched closely by financial markets.
Euro - European Markets
The euro has rallied this morning, with currency rates climbing against the US dollar, pound, yen and Canadian dollar. Over the last week the euro has climbed to over 1.42 against the US dollar and is currently trading at 0.8616 against the pound.
PMIs for both the manufacturing and service sector out this morning show a more positive picture for the eurozone. While both sets of data remain on the negative side of 50, the pace of economic decline in the manufacturing and service sector is slowing and the indices are edging closer to 50 which indicates a return to positive activity in the eurozone. The German IFO business climate and expectations have also risen to more positive territory, supporting euro exchange rates this morning.
Other Currencies - Highlights
The Korean economy grew by 2.3% in the second quarter, the fastest growth in nearly six years as stronger consumption and export figures drove the economy to expand. LG Electronics, Samsung and Hyundai all reported better than expected profits and consumer spending rose to a seven-year high following record lows in interest rates.
The Bank of Canada has claimed the recession is ending as commodity prices and consumer confidence increases. Currency rates for the Canadian dollar have risen to a seven-week high against the US dollar with the loonie gaining 0.9% to 1.0895 per US dollar yesterday.