Pound Sterling - UK Markets

Sterling currency rates gained ground yesterday after the UK posted its largest manufacturing rise in 18 months. This morning sterling exchange rates are more mixed with the pound gaining on the yen, Australian and New Zealand dollars while falling against the euro and US dollar. The pound is currently trading at 1.13 and 1.64 respectively against the euro and US dollar.

After unexpectedly strong production data yesterday, the pound has trimmed gains this morning after the UK trade balance came in worse than expected. The total trade balance increased to GBP-2.45 billion from -2.37 billion the previous month, while the goods trade balance rose to GBP-6.5 billion. Sterling currency rates are likely to remain bearish today ahead of the interest rate decision tomorrow.

US Dollar - US Markets

Currency rates for the US dollar weakened yesterday amid improved risk appetite in the market, sinking to a two-week low against the pound. This morning the greenback has trimmed losses against the pound, rising to 0.60 and is currently trading higher against the yen, Australian, Canadian and Kiwi currencies.

US stock markets rallied yesterday on news that recession is nearing an end, after positive production figures in the UK improved market optimism. The US dollar weakened as gold prices reached their highest level since March 2008 and the US dollar came under renewed pressure as the world's foremost reserve currency. New mortgage application figures and the Fed's beige book are released in the US today.

Euro - European Markets

Currency rates for the euro are stronger this morning, climbing against most of its currency partners with the exception of the Danish kroner and Israeli shekel. The euro is currently trading at 0.87 versus the pound and 1.44 against the euro.

Yesterday the euro gained nearly 1% against the US dollar as the greenback suffered due to rising confidence in the market. This morning Germany's consumer price index came in at 0.2% on the month or 0% on the year, indicating a stable inflation outlook for the eurozone. There is no further data from the region today, with euro exchange rates likely to be affected by the UK rate decision and US jobless claims out tomorrow.

Other Currencies - Highlights

Australian currency rates stalled yesterday after four days worth of gains against the pound, as sterling strengthened amid improved sentiment. Overnight Australian retail sales fell a disappointing 1% in July as the government rolls back emergency stimulus measures. Housing finance figures in Australia also fell a further 2% illustrating first home lending may have peaked and the property market is returning to stability. Currency rates for the Aussie and Kiwi currencies are likely to be affected by the RBNZ interest rate decision overnight.

Canadian currency rates may also suffer some volatility in the run up to the Bank of Canada interest rate decision due this evening. Rates are expected to stay on hold but recent data shows the Canadian economy is recovering at a faster pace than expected. The Canadian currency has weakened this morning after touching on a one-month high against the US dollar yesterday.