Pound Sterling - UK Markets

Sterling currency exchange rates are little changed overnight. The pound is currently trading at 1.51 against the US dollar and 1.11 against the euro. The pound is also up slightly against its other European, Asian and North American currency partners on the back of improved retail sales figures for April.

British retail sales rose at their fastest level in 3 years in April, jumping 6.3% from the same time last year. This news boosted sterling this morning and added to hopes that the recovery process may be underway. New enquiries in the housing market and house prices have also shown a tentative improvement. An OECD think tank has noted the pace of decline may be easing in France, the UK and China despite the fact that the global economy as a whole remains in deep recession. Industrial production figures for March released this morning show a -0.6% contraction, with manufacturing production declining by -0.1%. Both results are better than expected. The Bank of England's Quarterly Inflation report is due tomorrow and this is likely to affect the underlying trend in sterling.

US Dollar - US Markets

The dollar is down 0.43% against the euro this morning and has sunk 0.47% against the pound to trade at 0.73 and 0.65 respectively. The dollar has also declined against the Australian, New Zealand, Japanese and Canadian currencies.

Following an eight-week rally, equity markets in the US have returned to a more neutral mode as there remain a number of unknowns in the financial system. Bank of America is reportedly under pressure from US regulators to raise funds and is said to have sold off a 5.8% stake in China Construction Bank for approximately USD7.3 billion. Ben Bernanke in a speech yesterday encouraged firms to raise capital independently. Bernanke also noted that the strong US dollar would help curb inflation in the US and the Federal Reserve will gradually withdraw financial support in a "timely" way. The US trade balance is likely to be the major market mover today.

Euro - European Markets

The euro has climbed to 1.36 on the US dollar, significantly higher than last week's exchange rate as improved risk appetite has supported the single currency. The euro has also climbed 0.4% on the Japanese yen and Canadian dollar while declining against the pound, Australian dollar and New Zealand dollar.

Germany's consumer price index came in at a flat 0% in April, rising 0.7% on the year. The fact that Easter fell in April this year is partially responsible for the upturn in economic figures which has occurred across Europe and the UK. The euro is currently trading near a seven-week high on the dollar as economists speculate the ECB could keep interest rates on hold next month. Comparatively high interest rates and reserve status are positive for the euro. Reports of recovery from the OECD are also helping the euro maintain support above 1.3 against the US dollar. EMU industrial production figures are due tomorrow. 

Other Currencies - Highlights

The Australian dollar weakened against the pound and US dollar overnight as markets stalled after the rapid gains made in the last few days. The Australian dollar surged to a 12-year high against the pound in the last week on the back of improved commodity prices and appetite for risk. This morning the Aussie dollar has dropped back to 1.98 against the pound.

Industrial production in India has fallen by the most in 16 years as the global recession has forced slumps in growth and production. The Indian government has slashed interest rates and increased government spending in an attempt to stimulate the economy although the Indian rupee remains weak against its international currency partners.