Risk aversion rose overnight as global equities fell and the European Commission voiced concern over the stability of the European banking sector. The New Zealand dollar fell overnight as unemployment reached a nine-year high and today, currency volatility is expected following interest rate decisions from the MPC and ECB.

Pound Sterling – UK Markets

Currency rates for the pound are relatively unchanged this morning, remaining within recent trading ranges against the greenback and euro. Sterling is currently slightly higher against the Australian and New Zealand currencies.

Today all eyes are on the Bank of England decision as the MPC decides to expand their quantitative easing program or not. Yesterday the pound received a boost after the service sector PMI came in better than expected and consumer confidence was unchanged from last month. Industrial and manufacturing production figures are due this morning, followed by the Bank of England decision at noon.

US Dollar – US Markets

The greenback closed the day slightly down against the pound yesterday, after US factory orders came in positive and fuelled a round of risk appetite. This morning the US dollar is higher against its major currency partners, gaining 0.5% and 0.2% against the pound and euro respectively.

US dollar exchange rates gained ground yesterday after the FOMC voted to leave interest rates unchanged at 0.25%, and signaled that they may remain low for some time. This led traders to bet that interest rate rises may be delayed until mid 2010 and has kept risk aversion high in the foreign exchange markets. Today, US jobless claims and non-farm productivity figures could cause some currency volatility.

Euro – European Markets

The euro is slightly lower against the US dollar this morning ahead of the ECB interest rate decision while gaining slightly against the pound. The single currency reached a one-month low against the US dollar yesterday as a sell off in global equity markets triggered demand for the safe haven currencies.

Currency rates for the euro fell against the pound yesterday after the European Commission voiced fears over the eurozone economy. The banking sector is still regarded as unstable with UBS reporting greater than expected profit losses. The Commission did however, forecast growth would rise at a 0.7% rate in 2010. Today in the eurozone retail sales figures followed by the ECB interest rate decision will induce some currency volatility.

Other Currencies – Highlights

The New Zealand dollar dipped overnight as unemployment reached a nine-year high, rising to 6.5%. This ended a three-day advance for the Kiwi after Reserve Bank Governor Allan Bollard signaled that New Zealand's recovery would likely be slower than Australia's.

Australian exports jumped to an 11-month high in September, gaining 5% from August as Australian commodities increase due to demand from China. BHB Billiton and Rio Tinto both boosted iron ore exports to record levels in the third quarter, due to demand for steel.