Pound Sterling - UK Markets

Sterling currency rates weakened against the US dollar and euro yesterday, dragged lower by negative equity markets and lower risk appetite. In early trading this morning the pound has continued to slide against its international currency partners, currently trading at the 1.16 level against the euro and 1.62 against the US dollar.

Despite recent losses, the underlying trend in sterling currency exchange rates remains positive, as the market corrects from overselling of the pound during winter 2008/09. While markets generally rely on positive data to drive risk appetite, the absence of this in recent weeks has seen the higher yielding currencies fall to test support levels. Economists view the UK as well placed to exit recession and new mortgage approvals today show 31, 162 approvals in May, the highest level since April 2008. There is no further data in the UK today with the CBI distributive trades survey due tomorrow.

US Dollar - US Markets

Currency rates for the US dollar are mixed this morning against its international partners, with the greenback weakening against the yen, euro and Canadian dollar while gaining on the pound, Australian dollar and South African rand.

The dollar has benefitted from a rise in risk aversion in recent days as investors jostle for position ahead of the Federal Reserve interest rate decision tomorrow. Today a host of home sales data is due in the US, with existing home sales expected to rise from 4.68 million to 4.80 million. The euro has edged higher against the US dollar this morning as markets expect the Fed to leave interest rates unchanged. New home sales figures are released in the US tomorrow, along with the interest rate decision.

Euro - European Markets

Euro-sterling currency rates sunk to their weakest level since December yesterday ahead of the announcement of the ECB's one year re-financing plan. In early trading this morning the European currency has spiked against the US dollar, trading at 1.39 and risen against its international currency partners following positive data from the eurozone.

The eurozone manufacturing and service sectors contracted at the slowest pace in nine months to June, show figures released this morning. This suggests the eurozone economy could be stabilising, after the two sectors contracted at their fastest pace in 15 years in the first quarter of 2009. In contrast to this though are German PMIs, which came in below market expectations this morning. Yesterday the World Bank announced they expect the eurozone economy to contract by -4.5% this year. There is no further data in the eurozone today with the current account due tomorrow. 

Other Currencies - Highlights

Japanese yen currency rates have strengthened this morning, hitting a three-week high against the dollar and one-month high against the euro. The yen is benefitting from its safe haven status, as doubts over the strength of economic recovery affect risk appetite. The World Bank's annual growth forecasts released yesterday revised Japanese growth down by -6.8% on an annual basis. By contrast, the growth rates of India and China were revised upwards, to 5.1% and 7.2% respectively. Global growth levels are expected to contract 2.9%.