Pound Sterling - UK Markets

Foreign exchange rates for the pound have recovered this morning, following positive news from the service sector which has allowed the pound to gain 0.58% against the US dollar and 0.23% against the euro. Sterling is currently valued at 1.63 and 1.14 against the dollar and euro respectively, while also gaining against its major Asian and European currency partners.

The service sector PMI came in at 54.1 this morning, indicating a return to growth for UK services. Yesterday's data from the construction sector also allowed sterling to trim losses against the euro, rising from multi-month lows to trade in the region of 1.14. The trend in UK and European equities remains downbeat as after a sustained rally in the summer months, the race is on to provide evidence of global recovery. There is no further data in the UK today.

US Dollar - US Markets

US foreign exchange rates have lost ground this morning, falling on the back of rising risk appetite in the market. The greenback is trading over 0.5% lower against the pound and 0.4% lower against the Canadian currency, valued at 0.61 and 1.10 respectively.

Minutes from the FOMC meeting revealed little to surprise markets yesterday, as the Fed noted that the US economy is set to recover incrementally throughout the rest of 2009, while remaining vulnerable to shocks in the market. Treasury Secretary Geithner has addressed G20 nations stating it is still "too early" for exit strategies and that the global recovery has a long way to go. US data continues to improve, with factory orders rising 1.1% in July. US jobless claims are due today followed by the official unemployment rate tomorrow. 

Euro - European Markets

Foreign exchange rates for the euro have climbed this morning, strengthening against the US dollar, yen and Brazilian real while declining against the pound, Aussie and kiwi currencies.

The ECB interest rate decision is likely to affect euro exchange rates today, despite the fact that no change is expected to the base interest rate. Economists are predicting GDP forecasts will be revised upwards for 2009 and 2010, while the inflation outlook will remain the same. EMU retail sales have come in -0.2% lower in August, falling -1.8% on the year. ECB President Trichet is due give a press conference following the ECB decision at 1:30BST.

Other Currencies - Highlights

The Australian trade balance has slipped further into the red in July, falling to over AUD1.6 billion. A rally in Asian markets has sent Australian foreign exchange rates higher this morning, though they remain subject to international risk appetite. Foreign exchange rates for the New Zealand dollar ceded another cent to the pound yesterday, following improved construction sector data in the UK.

The South African rand has climbed against the US dollar for the second day in a row, following speculation that the current account deficit has narrowed in the second quarter. Markets are predicting the gap could shrink to 4.4% of GDP, following the 7% recorded in the first quarter as foreign investment increased this year. Having gained 21% against the greenback this year, there is a view that the rand is currently overvalued and needs to weaken further to support the export sector.