Pound Sterling - UK Markets

Sterling currency exchange rates declined against the US dollar and euro in early trading this morning with the pending release of unemployment data in the UK. The pound is currently trading at 1.63 against the US dollar and 1.17 against the euro.

Unemployment in the UK has continued to climb, reaching 7.2% in April with the number of jobless claims rising by 39,300. These figures are better than market expectations and could impact on sterling currency exchange rates today. Yesterday, the pound gained on the back of consumer price inflation data which showed prices rose 0.6% on the month. The annual fall however, was 0.1% which puts inflation still well above the government's target of 2%. Minutes from the MPC meeting are also released today and this could also affect sterling sentiment as the MPC debates current levels of quantitative easing.

US Dollar - US Markets

Foreign currency exchange rates are mixed this morning for the US dollar, which has declined against the euro, yen and Australian dollar, while gaining ground on the pound, Indian rupee and Turkish lira.

The dollar has come under pressure recently due to the emergence of more mixed economic data and increasing volatility in the bond market. Doubts expressed by the "BRIC" nations over the dollar's status as the premier international reserve currency have also affected dollar sentiment. The prospect of economic recovery has driven commodity prices higher, leading to a stall in equity markets and halting the upward trend of currency exchange rates recently. The consumer price index is out in the US today and this could affect dollar exchange rates.

Euro - European Markets

Currency exchange rates for the euro have climbed in early trading this morning, with the single currency reaching 1.3878 against the US dollar and gaining 0.44% on the pound. The euro is also broadly stronger against its Asian currency partners.

European stocks have dropped for the fourth straight day as investor confidence in recovery prospects wanes. Markets have become uneasy on the basis that the recent three-month rally in equities had outpaced the earning potential of many nations. The EMU trade balance has declined to EUR-0.3 billion for April and the ZEW survey for Switzerland has climbed to 9.7 from -3.9% the previous month. The German producer price index is released on Friday.

Other Currencies - Highlights

The Australian dollar sunk to seven-week lows against the pound yesterday, driven lower by falling commodity prices, a stronger pound and concern over the dollar's status as a reserve currency. As one of the world's largest commodity exporters, a drop in commodity prices has severe implications for Australian currency exchange rates. Its high yielding status means the AUD is also vulnerable to increases in risk aversion.