Pound Sterling - UK Markets

This morning the UK currency is trading at lower levels against its international currency partners, taking a knock from rising risk aversion on the back of economic uncertainty. Sterling currency rates are currently sitting at 1.63 against the dollar and 1.16 against the euro, while also declining against the Australian, Canadian and New Zealand currencies. 

International data released yesterday led to volatile currency rates and the pound initially lost ground to the euro, only to strengthen following the ECB interest rate decision. Sterling currency rates also declined against the US dollar following a drop in risk appetite due to bearish US figures. Yesterday Bank of England policymaker David Miles commented that the most severe declines in the manufacturing sector may be "behind us" although the construction sector PMI showed a steep decline. The service sector PMI is out this morning and with US markets closed for a holiday, this could be another volatile day on the currency markets for the pound.

US Dollar - US Markets

Currency rates for the US dollar are mixed this morning as the greenback climbs against its European currency partners while declining against most of the Asian currencies, with the exception of the Japanese yen.

Weak employment data in the US dampened risk appetite yesterday as non-farm payrolls declined by steeper than expected figures. Average hourly earnings were also flat and the official unemployment rate rose to 9.5%, on par with the eurozone. Economists are predicting US and eurozone unemployment rates could peak at 10% and equity markets declined across the board yesterday. Today US markets are closed for a public holiday.

Euro - European Markets

The euro has sunk below its previous support level of 1.40 against the US dollar following the ECB interest rate decision and is currently trading at 1.39. Against the pound, the single currency is currently valued at 0.85 having gained 0.17%.

The ECB decided to leave interest rates on hold yesterday at 1%, in a move widely expected by markets. Trichet also announced that ECB forecasts are for flat growth throughout 2010 and the eurozone unemployment rate rose to 9.5%. This data, in combination with US figures trimmed gains for European equities. Also yesterday Moody's downgraded Ireland's credit rating and revised their economic forecast for Ireland to 'negative'. Today EMU retail sales have also come in distinctly bearish, sinking by -0.4% in May or -3.3% on the year.

Other Currencies - Highlights

Economists are predicting Australia could soon bear the "full brunt" of the global recession, as falling export levels begin to impact on the national economy. Thus far the Australian economy has avoided recession, even growing in the first quarter on the back of demand for commodities. Yesterday however, a report showing exports slumped to a 14-month low saw Aussie currency rates lose 1.8% against the US dollar. The RBA interest rate decision is due next week and market consensus is for no change to the official base rate.