Pound Sterling - UK Markets

Sterling currency rates fell to their lowest level since April 2009 against the euro over the weekend, after public sector borrowing reached a record high in August. This morning the pound is lower against its major currency partners with the exception of the rand and yen, currently valued at 1.61 against the US dollar and 1.10 versus the euro.

News that public sector borrowing increased to GBP16.6 billion put the pound under pressure on Friday, as it was also revealed that the eurozone trade surplus grew. Fears over the health of Lloyds have also contributed to negative sterling sentiment, and the UK road to recovery is expected to be long and slow. This morning Rightmove house prices have shown a 0.6% increase on the month, capping sterling's losses. With no major data in the UK today the pound is expected to remain weak ahead of the Bank of England minutes released on Wednesday.

US Dollar - US Markets

Currency rates for the US dollar are stronger this morning, rising against the yen, pound and euro ahead of the Federal Reserve interest rate decision due this week. The greenback is currently trading at 0.68 against the euro and 0.61 against the pound.

Exchange rates for the greenback climbed against the pound on Friday as concern over the UK banking sector increased demands for the safe haven currency. Last week world equity markets rallied, reaching 2009 highs and returning to levels not seen since before the Lehman collapse. This led the US currency higher on the back of profit taking amid expectations that the major economies will return to growth in the third quarter. There is no data today in the US with the house price index released tomorrow.

Euro - European Markets

Euro currency rates are mixed this morning, climbing against the yen, pound, Australian and Canadian dollars while falling against the US dollar and Asian currency partners. The euro is currently trading at 1.46 to the US dollar and 0.90 versus the pound.

The euro rallied around 3% last week against the US dollar as positive economic figures stimulated demand for the single currency. A resurgent export market is helping to boost the European economy, with Germany expected to grow 1.5% in 2010. Sweden is also predicting that a rise in export levels will narrow the budget gap in 2010. There is no data in the eurozone today with the EMU purchasing manager index for manufacturing and services due on Wednesday.

Other Currencies - Highlights

Currency rates for the Australian dollar climbed for the fifth consecutive day against the pound as concern over Lloyds reduced confidence in the UK economy. The New Zealand dollar also gained 2 cents as high public sector borrowing reduced confidence in the pound. This morning New Zealand consumer optimism rose to a 29-month high following record low interest rates and signs of a recovery in the property market. New Zealand current account figures are due tonight.

Japanese yen exchange rates sunk to a one-week low against the US dollar after the Fed signalled they may look to withdraw economic stimulus measures from the US economy. Japan's currency is expected to decline as the global recovery gets underway and demand for the higher yielding currencies grows.