Pound Sterling - UK Markets

Sterling currency exchange rates continued to climb against the euro on Friday, closing the day 0.84 cents up at 1.1829. This morning the pound is currently trading in the region of 1.1844 against the euro and has declined against the US dollar and Japanese yen.

The pound lost ground against its international currency partners last week, following negative retail sales and unemployment figures in the UK. However the UK is still expected to be one of the first economies to exit the global recession, and recent survey results have been more upbeat. First quarter UK growth figures out this week are expected to show a contraction of -4% annually and sterling exchange rates are likely to be affected by international appetite for risk.

US Dollar - US Markets

US dollar exchange rates are stronger across the board this morning, climbing 0.52% on the euro and 0.38% on the pound ahead of the Federal Reserve interest rate decision due this week. The greenback is also nearly 1% stronger against the Australian and Kiwi currencies.

The upcoming FOMC meeting is likely to be a source of volatility for markets as it is will provide economists with some insight into the Fed's view of economic recovery. The rate of economic recovery is highly dependent on levels of quantitative easing and any changes in this field will likely trigger speculation and exchange rate volatility for international currency markets. Today is light for US data with a series of statistics from the property sector due tomorrow. The Federal Reserve interest rate decision is due on Wednesday. 

Euro - European Markets

The single currency has declined 0.5% against the US dollar this morning, currently trading at 1.38 following ECB president Trichet's comments this morning. The euro is also weaker against the pound and Japanese yen, while gaining 0.37% on the Aussie and Kiwi currencies.

ECB president Trichet commented this morning that the ECB had no intention of expanding stimulus packages and individual nations must work to reign in spiralling budget deficits in the wake of the financial crisis. This caused the single currency to sharply decline against the US dollar in early trading this morning. These losses may be limited however by the German IFO index of business conditions which shows conditions have improved in June for the third consecutive month. The index has climbed to 85.9 and this could be positive for euro exchange rates. There is no further data in the eurozone today with both the German and EMU purchasing manager index for the service sector out tomorrow.

Other Currencies - Highlights

Currency exchange rates for the Australian and New Zealand dollars are likely to be determined by broader market movements this week, as the Federal Reserve interest rate decision and US first quarter GDP figures are likely to affect international risk appetite. The Aussie and Kiwi dollars fell this morning against the greenback amid fears that global recovery could take years and the political situation in Iran may worsen, reducing demand for the higher yielding currencies. The New Zealand current account figures are due tonight.