Pound Sterling - UK Markets

Sterling currency rates touched on a new record against the euro overnight, climbing to 1.1756, driven by greater demand for riskier assets. The pound also surged to a six-month high against the US dollar, on the back of global recovery prospects. This morning, the pound has entered consolidation mode, trimming gains to trade at 1.651 and 1.173 against the dollar and euro respectively.

A Bank of England poll has shown rising expectations for inflation in coming months, and this boosted sterling currency rates yesterday. The NISER expects the UK economy will grow 0.2% in April and 0.1% in May, which also drove demand for the UK currency. Reports this morning that Nationwide and other mortgage lenders may raise the cost of borrowing have prompted fears that this may extinguish the glimmer of recovery in the housing market. There are no major announcements in the UK today.

US Dollar - US Markets

International currency rates for the US dollar have gained ground this morning, recovering from the previous days losses against its major currency partners. This morning the dollar is trading at 0.6 versus the pound and 0.71 against the euro, while also strengthening against a basket of international currency partners.

Stronger than expected retail sales figures released in the US yesterday, improved economic sentiment and increased optimism over the state of the US economy. Retail sales figures grew 0.5% for May as opposed to a -0.2% contraction in April. The economy also shed fewer jobs than expected. The International Energy Agency has forecast an increase in oil production, and this boosted oil prices yesterday. Oil has more than doubled in recent months, reaching an eight month high of USD72 yesterday. The import price index is out in the US today.

Euro - European Markets

Euro currency rates are relatively unchanged this morning, with the euro weakening slightly against a stronger US dollar and recovering ground against the pound, yen and Australian dollars. The single currency is trading at 0.85 against the pound while maintaining support above 1.40 on the US dollar.

The IMF is set to raise global growth expectations for 2010 to 2.4%, up from 1.9% as global recovery appears to be underway in the US and UK. This helped fuel a rise in the single currency and the euro appears to have found a support level around 1.4 against the US dollar. The ECB monthly bulletin has predicted the eurozone economy will return to growth by mid 2010. The German wholesale price index has risen by 0.1%. Industrial production figures are due for the EMU this morning and this could affect euro currency rates today.

Other Currencies - Highlights

Industrial production in Japan has risen 5.9% on the month for April, taking the annual rate of decline to -30.7%. The level of industrial production is expected to slowly increase as global demand recovers. Japan has experienced a significant contraction in production and export levels as consumer demand dropped away sharply with the onset of global recession. This month, consumer confidence has reached a 14-month high following signs that recession is easing.