Pound Sterling - UK Markets

Sterling foreign exchange rates have continued to climb against the US dollar, touching on a new seven-month high of 1.66. Against the euro the pound has also gained, trading at 1.16 this morning. Sterling foreign exchange rates have also improved against its major European and Asian currency partners.

Figures this morning show the service sector PMI has climbed to 51.7, a bullish result for the UK economy. As the service sector accounts for over 50% of GDP, this is positive news for sterling foreign exchange rates. UK consumers have also reported greater optimism in May than in the previous six months. Mortgage lending data released yesterday indicated that more first time buyers are returning to the markets and this could pave the way for recovery in the property sector. The MPC decision is due tomorrow although with interest rates currently at 0.5%, very little change is expected.

US Dollar - US Markets

US dollar foreign exchange rates continue to take a battering this morning with the dollar weaker against the euro, pound and a basket of its major currency partners. The dollar is currently trading at 0.60 against the pound, 0.70 against the euro and has sunk to an eight-month low against the Australian dollar following news that the Australian economy grew in the first quarter of 2009.

US housing data was better than expected by markets and this allowed the higher yielding currencies to extend their gains yesterday, with US foreign exchange rates slipping across the board. FOMC minutes are released today, but after little activity during April, these are expected to have minimal impact on foreign exchange markets. Ben Bernanke is due to testify on the state of the US economy and investors will be looking for him to assuage fears over levels of quantitative easing. Employment change and factory orders are also due later in the day.

Euro - European Markets

Euro foreign exchange rates are higher this morning against the US dollar and Japanese yen following news of growth in the Australian economy. The euro touched a seven-month high against the yen and is currently trading at 137.10.

Euro and sterling foreign exchange rates continue to surge on the back of global confidence and a diversification from USD/JPY risk trading. The German service sector PMI sunk to 45.2 in May, down from 46 the previous month, a negative result for the euro. However, the eurozone service sector PMI has climbed to 44.8, a slight improvement from last month. The EMU producer price index is released later in the day with retail sales for April and the ECB interest rate decision due tomorrow.

Other Currencies - Highlights

In a surprise announcement overnight, Australian GDP rose by 0.4% in the first quarter, defying the recession that has dragged down US, European and Asian economies. After contracting 0.6% in late 2008, the economy recovered to grow by 0.4% in early 2009. Australian equities and foreign exchange rates rose across the board with the AUD climbing to 82.40 against the greenback, the highest level in eight months. The Australian trade balance is due tomorrow.