Pound Sterling - UK Markets

Sterling currency rates continued to slide against the euro yesterday, falling for the third consecutive day ahead of the Bank of England decision. After closing the day down at 1.1365, sterling remains bearish this morning, trading around the 1.13 level and at 1.65 against the US dollar.

The Bank of England is expected to keep interest rates on hold at a record low of 0.5% for the sixth consecutive month and maintain current levels of quantitative easing in the economy. The UK is tipped to exit recession in the third quarter, although a return to growth will not bring an immediate end to high unemployment and low manufacturing and production levels. This morning Halifax house prices have risen 0.8% on the month and the Bank of England announcement is due at noon.

US Dollar - US Markets

Bullish equity markets led US currency rates lower yesterday on the back of improved risk appetite, sending the dollar to a two-week low against the pound. This morning the dollar has trimmed losses, rising 0.2% to 0.68 against the euro and 0.60 against the pound.

US equity markets have put in a strong performance this week, after renewed demand from Chinese markets boosted commodity prices. Today in the US several key pieces of data are released, including the July trade deficit which is expected to be little changed as export levels begin to recover. Jobless claims are also due, followed by a speech from treasury secretary Geithner.

Euro - European Markets

Euro currency rates remain firm this morning, climbing against the yen, pound, Aussie and New Zealand dollars while falling against the US dollar and Brazilian real. The euro is currently trading at 1.45 against the US dollar and 0.88 against the pound.

European stocks rose yesterday for the sixth consecutive day, sending the MSCI world index higher on the back of higher corporate earnings. French industrial output has climbed in July, boosting euro exchange rates against the yen. Today in the eurozone Germany's wholesale price index is due, along with a speech from the ECB's Axel Weber.

Other Currencies - Highlights

Currency rates for the New Zealand dollar were little changed after the Reserve Bank made few changes to last month's statement and noted that interest rates will remain on hold at 2.5% until 2010. The Australian unemployment rate came in overnight at 5.8%, while currency rates for the kiwi and Aussie dollars are likely to be affected by events in the UK and US today.

The South Korean central bank also voted to keep interest rates on hold at 2%, but provided a hawkish statement, citing the need to prevent rising inflation levels. Interest rates  in South Korea have been on hold for seven months now, although signs of a rapid recovery through rises in industrial production and consumer confidence have highlighted the need to raise interest rates in future.