Pound Sterling - UK Markets

The sterling-dollar exchange rate slid to 1.51 this morning as a downturn in risk appetite put the pound under pressure. Sterling is retaining support above 1.11 on the euro and is trading at JPY144 and AUD2 this morning. 

The Bank of England's quarterly inflation report released yesterday revised growth and inflation projections significantly downward, putting pressure on sterling exchange rates. The Bank predicted a -4.5% trough in growth this quarter and projected inflation would be running at 1.7% in 2 years time. Governor King also suggested economic recovery could be a gradual process with growth returning to the UK economy in the first quarter of 2011. This morning British Telecom has announced it will cut 10% of its work force, or 15,000 jobs after losing GBP1.28 billion in the last three months. There is no major data due in the UK for the rest of the week.

US Dollar - US Markets

The US dollar recovered yesterday as the rally in equity markets stalled due to weak economic data. The dollar is currently valued at EUR0.73 and GPB0.66 and has also gained against the Japanese, Indian and Australian currencies overnight.

US retail sales fell 0.4% in April, a larger than expected drop with petrol and electronic goods particularly hard hit. Following rising retail sales in February and March, the decline was unexpected and takes the annual rate of contraction to -10.1%. Unemployment levels, which have reached a 26-year high, are partly to blame for the decline in consumer spending. This news, combined with downbeat growth forecasts for the UK led to a mild setback in global equities and oil prices as investors became wary of taking on too much risk. Initial jobless claims and the producer price index are due out in the US today.

Euro - European Markets

The euro rate is relatively unchanged against the dollar this morning, trading at the 1.36 level. The euro has also posted gains against the pound, yen and Australian dollar this morning, though weakened slightly against the Canadian and New Zealand dollars.

The euro rate slid against the US dollar yesterday as negative growth forecasts in the UK and a sharp contraction in US retail sales minimized the appetite for risk. Eurozone industrial production was also much weaker than expected in March, falling to -20.2% year on year. Today the ECB monthly report is due with German GDP figures released on Friday.

Other Currencies - Highlights

Diminishing appetite for risk is weighing on the Kiwi dollar at present, as the stall in global equities reduces demand for higher yielding currencies. Lacking the recent commodity based boost the Australian dollar received and with a worse economic outlook, the Kiwi dollar has come under pressure and is currently trading at around USD0.61. New Zealand retail sales figures for March are announced today.

Economists are predicting Japan's economy shrunk at a record pace last quarter, by an annual 16.1%. This is amidst an unprecedented drop in export levels as the strong yen has affected export levels. Japanese manufacturer Sony has reported their first annual profit loss in 14 years, joining other manufacturing giants such as Toyota and Hitachi in large scale profit write downs. In China, industrial production has also slowed for the second consecutive month, taking the annual rate down to 7.3%. Japan's domestic corporate goods price index is due out today.

Cycling for Charity

And finally, if you want to do something positive with your currency, two of our directors, Hakan and Tien are about to embark on a week-long cycle from Bayonne to La Rochelle in France. All funds are donated to Islamic Relief, an international relief and development charity that aims to alleviate suffering among the world's poorest people. 

To donate to this worthy cause, please visit http://www.justgiving.com/hakanenver

Thank you for your support!