Increased confidence on a global scale has kept the dollar subdued and given the euro some breathing space to extend gains against the US currency. The pound has remained relatively steady overnight, with a slight rally this morning following UK trade figures showing a minor narrowing of the deficit.

Pound Sterling – UK Markets

The British Chambers of Commerce’s economic survey for the fourth quarter of 2009 notes that there have been improvements in many areas of the British economy, particularly in manufacturing. Retail sales figures for December were also encouraging, but it should be noted that there may have been a fair amount of front-loading prior to the VAT increase and January’s figures are vulnerable to a fall. Another poll from the Royal Institution of Chartered Surveyors reveals that UK house price growth slowed in December, the first fall since February’s low point. At 0856 GMT sterling was steady against the dollar at 1.609.

US Dollar – US Markets

The US dollar declined against other major currencies this morning as risk appetite returned on renewed confidence about an impending global economic recovery. The renewed optimism fueled demand for the euro, pushing the greenback to trade at EUR0.689 (the lowest level in three weeks) and 0.620 against the pound at the time of writing.

Euro – European Markets

The euro has extended Friday’s gains against the dollar and at 0857 GMT traded at USD1.45 and 0.899 versus the pound. Recent negative US economic data has dampened expectations of imminent interest increases and an increase in risk appetite, creating a demand for growth sensitive currencies such as the euro at the expense of the greenback. With no news expected from the Euro-Zone today, the euros movements will likely be determined by movements in equities as well as news from the US.

Other Currencies – Highlights

The Japanese yen advanced to trade around 133.48 against the EUR and at 92.10 against the US dollar. It also made gains against the pound to trade around 148.20 at the time of writing. However, the outlook may not be as bright as expected as Japan's new finance minister, Naoko Kan, stated shortly after taking over the position this week that he is in favor of a continued weakening of the Yen versus the US Dollar.