Risk aversion reigns
Pound Sterling - UK Markets
Sterling exchange rates are weaker across the board this morning, sinking over 1.2% against the US dollar and over 2% against the yen as investors favour the reserve currencies. The pound is currently exchanging at 1.15 against the euro and 1.61 against the US dollar.
Friday's service sector data was weaker than expected in the UK, with the index falling to 51.6. At present, rising unemployment is limiting recovery prospects although the upward trend could resume as levels of bank lending rise. Today is light for UK data although Halifax house prices, industrial production and manufacturing figures are likely to impact on sterling exchange rates tomorrow. The Bank of England MPC also meets this week to deliver an interest rate decision.
US Dollar - US Markets
US dollar exchange rates have strengthened this morning following a rise in market risk aversion. The greenback is currently exchanging at 0.62 versus the pound and 0.71 versus the euro.
US markets were closed on Friday for Independence Day and this exacerbated currency volatility in foreign exchange markets. This morning investors are wary of taking on risk in an uncertain market as employment figures last week revealed the US is facing its highest jobless rate in quarter of a century. This is capping new business development and forecasts for corporate earnings over the coming months remain low. Today is light for US data with the Washington Post consumer confidence survey due tomorrow.
Euro - European Markets
Euro exchange rates are mixed this morning, climbing against its higher yielding currency partners but losing ground against the safe haven yen and US dollar. The single currency is exchanging at 0.86 versus the pound and has dropped to 1.39 against the US dollar.
Equity markets in Europe are weak this morning as they remain under pressure from downbeat economic forecasts in the US. Last week the ECB opted to leave interest rates on hold at 1% and figures showed deflation is occurring across major economies in the eurozone. This morning the Sentix investor confidence survey fell to -31 in July from -27 the previous month suggesting investor confidence is wavering in the eurozone. The rest of the day is light for US data with German factory orders due tomorrow.
Other Currencies - Highlights
Australian dollar exchange rates have declined this morning, extending a week of losses against its major currency partners in anticipation of the RBA interest rate decision and unemployment data released this week. An ANZ figure for new job advertisements has declined -6.7% on the month in June, suggesting that there may be a rise in the official unemployment rate. The official unemployment rate is also due in Canada this week and these figures are likely to affect exchange rates in the commodity based economies.