Pound Sterling – UK Markets

Sterling exchange rates have started the week on a high note, rising against its major Asian and American currency partners to trade at 1.67 against a weaker US dollar. The pound is also higher against the Aussie and Kiwi currencies while falling against the euro.

Sterling received a boost on Friday after eurozone GDP came in slightly weaker than expected, allowing the pound to push higher against the single currency and US dollar. This week we can expect some volatility from the pound as the consumer price index and retail figures are accompanied by the Bank of England's inflation letter.

US Dollar – US Markets

Exchange rates for the greenback are largely weaker this morning as risk appetite rises, sending the US dollar 0.5% and 0.3% lower against the pound and euro respectively. The US dollar is currently trading at 0.66 to the euro and 0.59 to the pound.

US retail sales figures are due out today and these are expected to climb in October on the back of the “cash for clunkers” initiative. Markets are anticipating a 1% rise and this could lead to further gains for the higher yielding currencies at the expense of the US dollar and yen. Today also brings business inventories data and a speech from Ben Bernanke, which could provide an insight into future Fed policy.

Euro – European Markets

Euro exchange rates are almost uniformly higher against its major currency partners, with the exception of the South African rand and Swedish kronor. The single currency is currently valued at 1.49 to the US dollar and 0.89 to the pound.

Euro exchange rates dipped slightly against the pound on Friday after GDP figures came in slightly weaker than expected. News that France and Germany's economies recorded growth for the second consecutive quarter was tempered by the fact that eurozone GDP came in at 0.4%, slightly lower than market expectations of 0.5%. Industrial production is also up 0.3% for the region. Today brings core inflation figures for the eurozone, followed by the trade balance out tomorrow.

Other Currencies – Highlights

The Japanese economy has continued to grow, recording 1.2% growth in the third quarter, or an annual pace of 4.8%. Although this is the second consecutive quarter Japan has recorded growth, the economy is expected to remain sluggish and the yen remains strong due to international risk aversion. Bank of Japan Governor Shirakawa has spoken today about the risk of keeping interest rates low for too long and sentiment in Asian markets remains weak.