Pound Sterling - UK Markets

Sterling exchange rates continued to slide yesterday, closing the day at 1.12 against the single currency. This morning the pound rose against the US, Australian and New Zealand currencies, while falling against the euro and Canadian dollar. Sterling is currently valued at 1.65 to the US dollar and 1.12 to the euro.

Weak labour market figures put the pound under pressure yesterday, as the unemployment rate rose to 7.9%. The pound was prevented from sliding too far by strong equity markets in the US which supported sterling exchange rates, as the FTSE reached a 12-month high. Despite the recent volatility, sterling exchange rates remain steady on a trade weighted basis. This morning's retail sales figures have failed to provide the good news sterling needs, with retail sales unchanged from last month and only 2.1% higher than this time last year. The CBI industrial trends survey is due today, with public sector borrowing out tomorrow.

US Dollar - US Markets

Exchange rates for the US dollar have slid this morning, trading lower against the euro, yen and pound after positive inflation figures in the US yesterday. This morning the greenback is currently trading at 0.67 to the euro and 0.60 to the pound.

US equity markets received a boost yesterday after Ben Bernanke claimed the US recession was "very likely over" following positive inflation figures in the US. Steady core inflation helped fuel market confidence as it will help the Fed when it comes to tightening monetary policy. The US current account deficit was negative however, increasing by more than expected. Today in the US, initial jobless claims and new building permits will be of interest to markets.

Euro - European Markets

Euro exchange rates have gained ground this morning, trading at higher levels against its major currency partners with the exception of the yen and Swedish kroner. The euro extended gains against the pound yesterday, and is currently trading at 0.89 to the pound and 1.47 against the US dollar.

Yesterday in the eurozone inflation figures came in around 1.3%, suggesting prices are stabilizing in the region and giving support to euro exchange rates against the pound and US dollar. This morning the EMU trade balance has come in at EUR6.8 billion with construction output falling -2% on the month. The euro has gained over 2.5% against the US dollar recently and economists are predicting a correction could come in the short term. The EMU current account is released tomorrow.

Other Currencies - Highlights

The Bank of Japan left interest rates on hold at 0.1% overnight and stocks rose on higher commodity prices. Property prices in Japan have fallen 4.4% in the last year, as the steep recession has led consumers to delay making major purchases. The pound, euro and US dollar are all trading at weaker levels against the yen this morning.

Exchange rates for the Australian and New Zealand dollars remain trading at high levels against the pound and US dollar, as optimism returns over the state of the US economy. Healthy US inflation figures and retail sales this week have led to a rally for the higher yielding currencies, with the Aussie reaching a 12-month high against the US dollar and a 10-year high against the pound.