Pound Sterling - UK Markets

Sterling exchange rates reached a one-month low against the euro yesterday after positive growth reports from the European Commission strengthened euro exchange rates. This morning the pound is trading higher against its major currency partners with the exception of the Mexican peso and South African rand, currently valued at 1.66 against the US dollar and 1.13 against the euro.

Inflation figures out this morning show the UK core inflation rate is running at 1.8%, as lower food and energy prices have helped drag core consumer prices lower. Consumer prices fell -0.4% on the month to August and are expected to keep falling until the end of 2009 before picking up in 2010. The latest Bank of England inflation report predicts inflation could fall as low as 1% in late autumn and this could keep sterling exchange rates under pressure. There is no further data in the UK today.

US Dollar - US Markets

US dollar exchange rates are mixed this morning, trading higher against the euro, yen and Canadian dollar while falling against the pound and major Asian currency partners. The greenback is currently trading at 0.68 to the euro and 0.60 against the pound.

Today is packed with US data as retail sales figures and the producer price index are due. Retail sales are expected to jump by 2.4% as the "cash for clunkers" initiative led to a spike in retail spending. Underlying retail trends in the US appear to have stabilized despite unemployment continuing to rise. The producer price index is expected to be in the region of 0.9% on the month. The Washington Post consumer confidence survey is also due today.

Euro - European Markets

Euro exchange rates received a boost yesterday, reaching a one-month high against the pound after positive growth predictions for the region. This morning the euro is weaker against its major currency partners, losing 0.2% against the dollar and 0.3% against the pound to trade at 1.45 and 0.87 respectively.

European equities opened the week in consolidation mode ahead of a week packed with important economic data. Yesterday the European Commission predicted the region would return to growth in the third quarter and this sent euro exchange rates higher. This morning the German ZEW survey came in at 57.7, lower than markets were expecting while the EMU results were better, with the index reaching 59.6. EMU inflation figures are due tomorrow.

Other Currencies - Highlights

South African finance minister Pravin Gordhan has stated the government will not intervene to manipulate currency exchange rates for the rand, despite calls from miners and manufacturers to do so. The South African rand has been one of the best performing currencies this year, appreciating 27% against the US dollar on the back of global recovery and the strong currency is making exports less competitive. The rand is currently valued at 0.13 to the US dollar.

Exchange rates for the Australian dollar fell for the third consecutive day yesterday, as the government has warned against "tightening" fiscal policy too early. The Reserve Bank will have to closely weigh inflation rates against the risk of stifling economic recovery when they meet next month. The Australian dollar is currently at 1.93 to the pound and 1.16 to the US dollar.