Pound Sterling - UK Markets

Sterling foreign exchange rates are weaker this morning after the Federal Reserve highlighted the gradual nature of economic recovery yesterday and this led to risk aversion in the market. This morning the pound has fallen 0.71% against the US dollar to 1.62 and has dropped to 1.09 against the euro.

The MPC minutes released yesterday noted that the UK economy had stabilized and improved growth rates are expected in the third quarter. However the pace of recovery is expected to be weak, due to high levels of government debt and weak interbank lending. This morning the pound has weakened further against its European and Asian currency partners after the Fed noted growth rates were not sufficient to withdraw economic support in the US. There is no major data in the UK today.

US Dollar - US Markets

Foreign exchange rates for the US dollar have experienced volatility overnight, following the interest rate decision from the Federal Reserve. This morning the greenback is trading higher against the pound and Canadian dollar, while falling against the euro and Japanese yen.

Yesterday the Federal Reserve opted to leave interest rates on hold and continue with their asset purchase programme, noting that the return to growth in the economy is still not sustainable enough to withdraw economic stimulus measures. At present world growth is expected to turn positive in the third quarter although the emerging economies are expected to outstrip the pace of growth in the US, Europe and UK. Initial jobless claims in the US are due today and the G20 is due to meet on Friday.

Euro - European Markets

Euro foreign exchange rates remain firm this morning, gaining ground on the pound, US and Canadian dollar while falling against the yen and Asian currency partners. The euro is currently valued at 0.91 versus the pound and 1.47 against the US dollar.

Today in the eurozone the German IFO business climate index has come in at 91.3 for September, with business expectations rising to 95.7. These figures are less than markets were expecting, showing the pace of recovery is moderating in the eurozone. The euro remains firm at present, benefiting from improved confidence in the global economy. There is no further data in the eurozone today, with the German producer price index due tomorrow.

Other Currencies - Highlights

Australian foreign exchange rates trimmed gains against the pound yesterday after the MPC minutes showed there was no discussion of cutting interest rates further in the UK. This morning the Aussie dollar is trading higher against the US currency, near a 13-month high after the central bank claimed the nation's lenders have weathered recession well.

Japanese export levels have continued to fall in August, but the pace of decline has moderated from last year when they "fell off a cliff" as global trade dried up due to recession. The Nikkei index has risen to a one-month high on speculation of profits and the yen is currently trading at 146.58 to the pound and 90.47 per US dollar.