Pound Sterling - UK Markets

Sterling currency rates have climbed against international currency partners overnight, gaining 0.6% on the US dollar and yen, while also climbing 0.3% against the Australian dollar and euro.

Economic data released this week has suggested that the UK is likely to make a slow and gradual economic recovery. The Bank of England's financial stability report has noted that while financial conditions are easing, the banking system remains fragile with the estimated cost of the financial crisis amounting to GBP10 trillion. Next week in the UK mortgage lending data and consumer credit figures are due and these could provide valuable insight into personal consumption levels, which are central to economic recovery.

US Dollar - US Markets

US currency rates are weaker against the euro and pound this morning as markets digest the FOMC decision. The dollar is also down against the Canadian and Australian dollars while gaining on its Asian currency partners.

The Federal Reserve decision to leave interest rates on hold was viewed largely as positive by markets, as the failure to add to the stimulus programme was interpreted as a sign that recession is easing and current levels of quantitative easing are working in the US. However the fact that the Fed did not mention rate rises or exit strategies capped gains to some extent. Personal consumption figures are out in the US today and as a key indicator of economic health, these could be a source of volatility for currency rates.

Euro - European Markets

Currency rates for the euro are largely stronger this morning as the single currency has climbed against the US, Australian and New Zealand dollars. The euro is weaker against the pound and Canadian dollar, trading at 0.85 and 1.61 respectively.

News that the ECB is to aid banks through refinancing has boosted euro support overnight, while the positive interpretation of the Fed decision has also increased demand for currencies outside the traditional safe havens. The German import price index released this morning is flat for May, declining at an annual rate of -10.4%. German CPI data is released later in the day.

Other Currencies - Highlights

New Zealand GDP fell by 1% in the first quarter, a greater contraction than expected and marking the country's worst recession in three decades. This is the fifth consecutive quarter of contraction for the New Zealand economy which has been hit hard in the global recession through a downturn in trade and tourism. Kiwi currency rates have fallen on the back of the news, while demand for the higher yielding Aussie has surged.