Pound Sterling - UK Markets

Sterling currency exchange rates have gained ground this morning, trading higher against most of its major currency partners with the exception of the New Zealand and Canadian dollars. The pound is currently valued at 1.63 against the US dollar and 1.14 against the euro.

The pound climbed to a one-week high against the euro yesterday, following news that the service sector improved in August. Private services account for 50% of UK GDP and this helped boost UK sentiment. The pound also trimmed gains following a speech from President Trichet which noted the risks to euro economic recovery. There is no data in the UK today, with manufacturing and industrial statistics due on Tuesday.

US Dollar - US Markets

Currency exchange rates for the US dollar have weakened slightly this morning, losing 0.14% against the pound and euro to trade at 0.61 and 0.70 respectively. The US dollar is also lower against its major currency partners with the exception of the yen, South African rand and Mexican peso.

Initial jobless claims rose 570,000 in the week to August 29, declining by 4,000 from the amount lost the previous week. The ISM non-manufacturing survey also rose to 48.4, showing positive conditions in the non-manufacturing sector of the US economy. At present the underlying trend in equity markets is positive. Today in the US average hourly earnings, the official unemployment rate and non-farm payrolls will be watched with interest by markets.

Euro - European Markets

Currency exchange rates for the euro are firm this morning, after the ECB decided to leave interest rates on hold yesterday. The euro has gained on the yen, US dollar and Brazilian real while falling against the Canadian, Aussie and kiwi currencies.

The ECB voted to leave interest rates on hold at 1% yesterday, while ECB President Trichet gave a speech warning of "uneven" recovery. Forecasts for 2009 and 2010 were revised moderately upwards, while the inflation outlook remains stable. Interest rates are expected to remain low while unemployment is a key concern for the ECB. Sweden's Riksbank also voted to keep rates on hold at 0.25%. This morning Switzerland's consumer price index has come in at 0.1% on the month, and -0.8% on the year.

Other Currencies - Highlights

Currency exchange rates for the South African rand have weakened from a six-week high against the US dollar this morning as markets expect the US unemployment rate could be more bearish than expected. The rand has dropped 0.6% against the US dollar due to a revival in safe haven trading.

The Mexican peso has rallied the most in seven weeks against the US dollar, after an improvement in Chinese stock markets. Exchange rates for the peso fell to their lowest in since mid-July yesterday, after the Mexican budget deficit widened to 3% of GDP, though has since recovered, boosted from speculation that Chinese demand will raise commodity prices.