Pound Sterling - UK Markets

Sterling foreign exchange rates have climbed steadily against the US dollar this morning, also rising against the euro, yen, Australian and Canadian dollars. The pound is currently valued at USD1.65 and EUR1.17, some of the strongest levels this week.

Sterling strength comes despite British Airways announcing a £148 million pre-tax profit loss in the three months to June. The loss is compared to a £37 million profit this time last year and comes due to a shrinking travel market as the fears of unemployment grow. UK MPs this morning have criticised the government's banking reforms for being largely 'cosmetic' and lacking teeth. With no major data out in the UK today, sterling foreign exchange rates are likely to be affected by US GDP data.

US Dollar - US Markets

The US dollar has weakened against the pound and euro in early trading this morning, also losing ground against its other major currency partners. The greenback is currently trading at GBP0.60 and EUR0.70.

Quarter two GDP figures released this afternoon will be the focus of foreign exchange markets today. Economists are predicting a -0.7% contraction in the world's largest economy, though recent shutdowns in the automobile industry could skew data to the downside. Signs of recovery in the US would increase risk appetite in the market leading to gains for the higher yielding currencies. The figures are announced at 12:30GMT.

Euro - European Markets

Euro foreign exchange rates are mixed this morning, gaining on the yen and US dollar while declining against the pound, Australian and Kiwi currencies. The euro is currently valued at 1.40 against the US dollar and 0.85 against the pound.

Euro area CPI figures out this morning show inflation is falling -0.6% on the year, with the unemployment rate coming in at 9.4%. These figures are not too far from market expectations and should support the euro, serving as evidence of further stabilization in the market. Yesterday a member of the Polish MPC stated that the Polish economy is likely to grow in the second half of 2009 and this sent zloty higher against the euro. There is no further data in the eurozone today. 

Other Currencies - Highlights

Foreign exchange rates for Japan have weakened this morning due to a rise in appetite for risk. This could change though with the announcement of US GDP, which could trigger a spike in safe haven buying if the figures are negative. Japanese unemployment rose to 5.4% in the last month while deflation raced ahead of market predictions, with prices falling by 1.8% over the year.

The New Zealand dollar remained in low ranges against its trading partners yesterday after the RBNZ announced further interest rate cuts could be possible in future. The NZD sunk to a 12-day low against the pound while the Aussie was boosted by rising risk appetite in the market.