Pound Sterling – UK Markets

Sterling currency rates have declined this morning, trading lower against all its major currency partners with the exception of the Australian, New Zealand dollars and the Swedish Kroner. The pound is currently valued at 1.63 against the US dollar and 1.15 against the euro.

Despite the more positive tone in global markets at present, the trend in sterling remains neutral. Last week the pound sunk against the euro after news that France and Germany have climbed out of recession, combined with downbeat inflation forecasts from that Bank of England heightened fears that the UK is lagging behind. This week brings a number of important statistics for the UK, beginning with consumer and retail price indices out tomorrow.

US Dollar – US Markets

US currency rates are higher this morning, gaining over 1% against the pound to trade at 0.61 and rising 0.6% on the euro to 0.70. The greenback is also higher against its European and Asian currency partners, with the exception of the Japanese yen.

Market sentiment has turned marginally positive in the US, following Friday’s industrial production figures which show output rose by 0.5% last month. Though this was largely felt in the automobile sector through the Fed’s “cash for clunkers” policy, the 1.9% rise in Canadian factory output also led to a more positive tone across North America. Today is light for US data with the producer price index due tomorrow.

Euro – European Markets

Euro currency rates remain firm this morning as the euro has consolidated on a week of gains against its major currency partners. The euro is currently 0.6% higher against the pound, trading at 0.86, while dipping against the US dollar to 1.41.

The euro was led higher last week following news that France and Germany have emerged from recession, with each nation posting 0.3% growth in the second quarter. Eurozone sentiment has improved with the positive growth figures, leading economists to speculate that a recovery in Eastern Europe could not be far behind. This morning’s figures show the European trade surplus has declined in June, falling to EUR1 billion. There is no major data released in the eurozone today.

Other Currencies – Highlights

The Japanese yen has strengthened this morning following news that Japan has also emerged from recession. Japan ended 4 consecutive quarters of contraction with the economy growing at an annual pace of 3.7% in the second quarter. The recovery has been driven by an upturn in exports, after plummeting consumer demand sent the export-reliant Japanese economy into recession last year. While the news is positive, economists are quick to point out that recovery has a long way to go with Japan’s unemployment rate currently running at a six-year high of 5.4%.

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Pound Sterling – UK Markets

Sterling foreign exchange rates are slightly lower this morning following worse than expected retail sales figures in the US. The pound is currently declining against its major currency partners, valued at 1.65 against the US dollar and 1.15 against the euro.

The pound declined against the single currency yesterday as the euro was buoyed by news that France and Germany had escaped from recession territory. This is significant news as the US and Europe are the UK’s two major export markets. There is no data released in the UK today and sterling will continue to take its direction from US and European announcements.
 
US Dollar – US Markets

US foreign exchange rates have gained this morning against the euro, pound and Australian dollar. The pound is lower against the yen, New Zealand and Canadian currencies.

US exchange rates received a boost yesterday after retail sales came in at -0.1% for July, the first decline in three months. Jobless claims also rose to 588,000 in the week to 8 August indicating that the US has not quite entered recovery phase though the Fed stated that activity is “levelling out”. US inflation and industrial production figures will be of interest to markets later in the day. 

Euro – European Markets

Euro foreign exchange rates have remained strong this morning, consolidating on recent gains and currently trading at 1.42 against the US dollar and 0.86 against the pound.

After GDP figures showed a return to growth for France and Germany yesterday, data this morning shows the Spanish economy contracted -1% in the second quarter. Spain is battling to recover economically as the country struggles with 18% unemployment and a deflated property market. The EMU consumer price index this morning has come in at -0.7% for July and there is no further data in the eurozone today.

Other Currencies – Highlights

New Zealand retail sales rose 0.1% on the month to June, adding to a more upbeat view of recovery. The Australian Reserve Bank governor noted that current interest rates are at “emergency levels” and indicated that the bank would work towards raising interest rates over the next few months. The hawkish testimony sent AUD foreign exchange rates to a yearly high against the US dollar.
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Pound Sterling – UK Markets

Sterling exchange rates gained over 1% against a weaker US dollar and fell further against the euro yesterday following the Bank of England’s quarterly inflation report. The pound is currently trading at 1.65 against the US dollar and 1.16 against the euro.

Yesterday’s inflation report produced downbeat forecasts, limiting speculation that the Bank will raise interest rates by year end. In combination with news that unemployment had reached a 15-year high in the UK, this painted a negative picture of the economy, affected sterling sentiment to the downside. However this negative data is in accordance with negative growth in the second quarter and the second half of 2009 could be more positive for the pound.

US Dollar – US Markets

US dollar exchange rates tailed off against the euro and pound overnight, as risk appetite was boosted by the FOMC decision in the US. The greenback is currently weaker against all its major currency partners, valued at 0.70 versus the euro and 0.60 against the pound.

Yesterday the FOMC of Federal Reserve announced they would seek to end quantitative easing by the end of the year, though interest rates are expected to remain low for an “extended” period of time. Markets took this as a positive assessment of economic recovery, which stimulated international appetite for risk. The US budget deficit also reached a record high of USD1.27 trillion. The import price index, jobless claims and retail sales figures are due in the US today.

Euro – European Markets

Euro currency exchange rates have continued to rally, climbing against the yen and US dollar, while declining against the pound, Australian and New Zealand currencies.

Euro area GDP figures released this morning show the region underwent a -0.1% contraction in the second quarter of 2009. In a surprise for markets, Germany’s economy grew 0.3% over the same time period and France’s economy also expanded. This triggered a 0.6% advance for the euro and led to speculation that the eurozone may be through the trough of recession. The euro consumer price index is due tomorrow. 

Other Currencies – Highlights

Australian currency exchange rates have received a boost, as risk appetite rallied following positive data from the US and eurozone. The Fed’s assessment that recession is “levelling out” drove the Aussie and Kiwi currencies to their second day of advances against the US dollar as investors sought out the higher returns on their investment. The Australian dollar rose 0.7% against the US dollar while the Kiwi currency climbed by 0.6%. 

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Pound Sterling – UK Markets
Sterling slipped this morning, hitting a one-week low against the euro after Royal Bank of Scotland posted a GBP1bn loss for the first half of 2009. The bank also said its results would continue to be poor for the next two years.

The announcement follows yesterday’s statement from the Bank of England that a further GBP50bn will be pumped into the banking system. The pound fell away from a 9 1/2 month high against the US dollar and brought an end to the broad gains sterling had made earlier in the week.

Elsewhere, UK factory-gate prices rose by more than expected in July, the Office for National Statistics has said. However, while monthly producer prices rose 0.3% in July from June, wholesale prices were 1.3% lower on the year. A 0.2% rise had been forecast.

US Dollar – US Markets
The US dollar is relatively unchanged against its European counterparts today and is only slightly lower against the yen, as markets await key US employment data later today. At the time of writing, the greenback is worth 0.5978 against the pound and 0.6964 against the euro.

Euro – European Markets
Italy’s recession eased in the second quarter of the year, with gross domestic product contracting less than expected, preliminary data from Istat has shown.

Europe’s fourth-largest economy shrunk by 0.5% in the April-June period, after a record 2.7% drop in the first quarter of 2009. Compared with the second quarter of 2008, Italian GDP fell by 6% in April-June 2009, after dropping by the same amount year-on-year in the first three months.

French trade deficit widened in June to EUR4.01bn, above expectations, due to falling exports and rising imports, according to seasonally adjusted customs data released today. Exports in June contracted to EUR27.44bn from a revised EUR27.91bn the previous month. In May, they had been initially estimated at EUR28.04bn.

The External Trade Ministry said the contraction was due to a fall in France’s energy bill, reflecting cheaper oil prices.

Other Currencies – Highlights
Swiss seasonally adjusted unemployment rose to 3.9% in July, from 3.8% in June; the highest figure since September 2004. Meanwhile, the unadjusted rate rose to 3.7% from 3.6%, the highest since January 2006. Although the jobless figure is low compared with current international standards, Swiss unemployment is likely to continue to rise throughout the year, impacting consumer spending.

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Pound Sterling – UK Markets

Sterling currency rates remain at the top end of recent ranges this morning, boosted by optimism that the UK may be beginning to emerge from recession. Sterling is currently trading at 1.69 against the US dollar, 1.17 against the euro and 1.81 against the Canadian dollar.

Unexpected signs of recovery emerged in the UK yesterday, with house prices, the service sector and manufacturing output all showing positive results. This triggered a rally in sterling currency rates, sending the pound higher against its international currency partners. The Bank of England is expected to leave interest rates on hold at 0.5% for the fifth consecutive month today, but may vote to extend its QE programme by up to GBP25 billion. The decision is announced at noon. 

US Dollar – US Markets

Currency rates for the US dollar are virtually unchanged this morning against the euro and pound, trading at 0.69 and 0.58 respectively. The greenback has dipped slightly against the Canadian and Australian dollars. 

US factory orders rose by 0.4% in June, sending the dollar to a 10-month low against the pound yesterday as optimism led to improved appetite for risk. The US service sector posted more job losses than expected in June and labour market data will continue today with the release of initial jobless claims. 

Euro – European Markets

Euro currency rates are mixed this morning, trading within narrow ranges ahead of the ECB interest rate decision due this afternoon. The euro is currently trading at 1.43 against the US dollar and has slipped to 0.84 versus the pound.

Eurozone retail sales fell unexpectedly in June by -0.2%, in opposition to the 0.2% rise markets were expecting. France’s largest bank Societe Generale, posted a 52% profit drop for the second quarter which slightly rattled confidence in the euro yesterday and today the Swiss consumer climate index has come in worse than expected. The ECB rate announcement will be followed by a press conference this afternoon that will provide an insight into the mindset of the ECB and likely affect euro exchange rates.

Other Currencies – Highlights

The Chinese central bank has warned overnight that monetary easing could give rise to ‘severe’ inflation and disrupt market stability in future. As signs that the recession is abating begin to show, the debate over quantitative easing, government debt and exit strategies is likely to be of increasing importance to markets and foreign exchange rates.

Currency rates for the Australian dollar have pared gains overnight, retreating from a 12-month high against the US dollar. This morning the Australian unemployment rate came in at 5.8%, better than the 6% expected by markets although in the context of interest rate decisions this has failed to move the AUD significantly. RBA economic forecasts are released overnight and these are expected to show improved growth forecasts with an outline for tightening monetary policy.
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Pound Sterling – UK Markets

Sterling foreign exchange rates have spiked against the US dollar this morning, rising above 1.69 on the back of positive economic data. The pound has also risen against its international currency partners, trading just below 1.18 against the euro.

The UK service sector PMI has expanded to 53.2, ahead of market expectations in July. Manufacturing production has also expanded by 0.4% adding further evidence to the case that the UK economy is on the road to recovery. This will be good news for the Bank of England who will make a decision regarding interest rates and quantitative easing levels tomorrow.

US Dollar – US Markets

Foreign exchange rates for the US dollar are mixed this morning, trading in choppy ranges against the euro and pound recently as risk appetite fluctuates in the market. This morning the greenback is valued at 0.58 versus the pound and 0.69 versus the euro.

Today is packed with US data that is likely to cause more currency volatility. Employment change, factory orders and ISM manufacturing data are released, to be followed by initial jobless claim figures tomorrow. These will help contribute to economic sentiment in the world’s largest economy and are likely to influence global risk appetite. If positive, this could influence the US dollar and yen negatively.

Euro – European Markets

Foreign exchange rates for the euro are also mixed, with the single currency climbing against the Australian and kiwi currencies while losing ground to the pound, yen and US dollar. The euro is currently valued at 1.43 against the US dollar and 0.84 versus the pound.

European retail sales shrunk -0.2% in June, contracting at an annual rate of -2.4%. The European service sector PMI has also noted a modest rise, climbing to 45.7 showing that the 16-nation eurozone could be beginning to climb out of recession. European stocks have climbed this morning in response to the news. An interest rate decision from the ECB is due tomorrow.

Other Currencies – Highlights

Australian foreign exchange rates have dipped from their yearly high as investors hedge risk ahead of unemployment figures released tomorrow. This has led the Australian dollar to reverse some of its gains from speculation that the Reserve Bank will raise interest rates by the end of the year. The New Zealand unemployment rate is also due tomorrow and this could limit appetite for the South Pacific currencies.

The Canadian dollar has weakened overnight, after the Canadian finance minister voiced concerns at the rapid rise of the currency. The CAD has recently appreciated to a 10-month high on the back of rising risk appetite, performing the best of 16 currencies against the US dollar last month. The central bank has noted they will verbally intervene if they believe CAD appreciation will inhibit recovery prospects.

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Pound Sterling – UK Markets

Sterling exchange rates climbed to a 9-month high against the US dollar yesterday, reaching USD1.70 as investors favoured risk in the market. The pound also rose 0.21 cents against the euro, following news that HSBC and Barclays operated profitably in the first half of 2009. This morning the pound has trimmed gains, but is still trading at the high levels of USD1.69 and EUR1.17.

Positive news from the banking sector and a modest expansion in manufacturing saw sterling begin the week on a positive note. The construction sector PMI this morning also shows an improvement to 47 points in July, indicating the pace of recession is easing and this is also likely to be positive for the pound. The Bank of England meets later in the week to decide whether to expand with their QE policy and this will be of interest to foreign exchange markets.

US Dollar – US Markets

Exchange rates for the US dollar are mixed this morning, falling against the yen, pound and euro, while rising against its other major currency partners. The US dollar is currently trading at 0.58 versus the pound and 0.69 versus the euro.

The upturn in global growth is reducing demand for the US currency at present. Yesterday PMIs from across the UK, Europe, US and China all reporting healthier results in manufacturing sectors leading to speculation that this could pave the way for economic recovery. The US dollar sunk to a 9-month low against the pound amid improved appetite for risk. Personal consumption figures are due in the US today and these are expected to show a 0.4% rise in spending, largely due to higher oil prices.

Euro – European Markets

Euro exchange rates rose over 1% against the US dollar yesterday following more positive sentiment in the eurozone. This morning the euro has trimmed gains, declining slightly against the yen, US dollar and pound while remaining strong against the Australian, Kiwi and Canadian currencies. 

The producer price index for the eurozone has risen 0.3% this month, though fallen -6.6% in the year to June. This is the greatest decline since 1981 as low oil prices and discounting forced manufacturers to keep prices low. Low oil prices are also helping to ease inflationary tendencies. Yesterday’s manufacturing data boosted demand for the euro though with an ECB interest rate decision due on Thursday, traders are currently limiting their appetite for risk.

Other Currencies – Highlights

Exchange rates for the Australian dollar have strengthened following the RBA decision to keep interest rates on hold for the fourth consecutive month. The RBA voted to leave interest rates at 3% as they claim risks to the economy are abating due to rising business and consumer confidence. The Australian house price index also rose in the second quarter and AUD could strengthen further with positive US consumption figures.

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Pound Sterling – UK Markets

Sterling foreign exchange rates have continued to capitalise on last week’s rally this morning, breaking out of recent ranges to trade at USD1.68 and EUR1.18. The pound has also climbed against the yen, Australian and New Zealand currencies. 

Better than expected US GDP figures boosted risk appetite late last week, sending sterling foreign exchange rates higher against the safe haven currencies. UK consumer confidence figures also showed a rise in July and this morning Barclay’s has announced an 8% profit rise for the first half of the year. The UK manufacturing sector PMI has climbed to 50.8 in July, expanding for the first time since March 2008. This week foreign exchange markets will be interested in the Bank of England interest rate decision.

US Dollar – US Markets

Foreign exchange rates for the US dollar have weakened this morning against all but the safe haven currencies due to the recent rally in risk appetite. The US dollar is currently trading at 0.59 against the pound and 0.70 against the euro, while sinking to a 10-month low against the Australian and New Zealand currencies.

US GDP figures released on Friday showed an annual 1% decline in economic growth. As the smallest contraction in four quarters this was taken as positive news by investors, reviving hopes that the world’s largest economy could return to growth in the second half of 2009. US construction spending figures are out today with personal consumption figures likely to cause some volatility later in the week.

Euro – European Markets

Foreign exchange rates for the euro are largely stronger this morning, rising against the yen, US dollar and other European currencies. Increasing risk appetite has also seen the euro fall against the pound, Australian and Kiwi dollars.

European stocks rose this morning following news that Barclays and the European arm of HSBC posted a profit in the first six months of 2009. PMI figures this morning show the European manufacturing sector contracted less than expected in July, with the index rising to 46.3. In combination with the UK announcing a modest expansion in manufacturing, this triggered optimism over the state of European economies. The ECB is also due to make an interest rate decision this week and this could lead to further currency volatility.

Other Currencies – Highlights

Foreign exchange rates for the Australian and New Zealand dollars have risen to their highest level in 2009 on the back of market optimism over recovery. The Aussie and Kiwi have also recorded their longest stretch of gains since 2004 against the US dollar. Housing and retail statistics are due in Australia today and these could provide fuel for further gains. The AUD is currently trading at GBP0.49 and USD0.84.

The Canadian economy contracted in May for the 10th consecutive month as falling manufacturing and exports plunged the economy deeper into recession. This morning however, Canadian foreign exchange rates have received a boost from a revival in risk appetite and the Canadian dollar has climbed to USD0.93.

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Pound Sterling – UK Markets

Sterling foreign exchange rates have climbed steadily against the US dollar this morning, also rising against the euro, yen, Australian and Canadian dollars. The pound is currently valued at USD1.65 and EUR1.17, some of the strongest levels this week.

Sterling strength comes despite British Airways announcing a £148 million pre-tax profit loss in the three months to June. The loss is compared to a £37 million profit this time last year and comes due to a shrinking travel market as the fears of unemployment grow. UK MPs this morning have criticised the government’s banking reforms for being largely ‘cosmetic’ and lacking teeth. With no major data out in the UK today, sterling foreign exchange rates are likely to be affected by US GDP data.

US Dollar – US Markets

The US dollar has weakened against the pound and euro in early trading this morning, also losing ground against its other major currency partners. The greenback is currently trading at GBP0.60 and EUR0.70.

Quarter two GDP figures released this afternoon will be the focus of foreign exchange markets today. Economists are predicting a -0.7% contraction in the world’s largest economy, though recent shutdowns in the automobile industry could skew data to the downside. Signs of recovery in the US would increase risk appetite in the market leading to gains for the higher yielding currencies. The figures are announced at 12:30GMT.

Euro – European Markets

Euro foreign exchange rates are mixed this morning, gaining on the yen and US dollar while declining against the pound, Australian and Kiwi currencies. The euro is currently valued at 1.40 against the US dollar and 0.85 against the pound.

Euro area CPI figures out this morning show inflation is falling -0.6% on the year, with the unemployment rate coming in at 9.4%. These figures are not too far from market expectations and should support the euro, serving as evidence of further stabilization in the market. Yesterday a member of the Polish MPC stated that the Polish economy is likely to grow in the second half of 2009 and this sent zloty higher against the euro. There is no further data in the eurozone today. 

Other Currencies – Highlights

Foreign exchange rates for Japan have weakened this morning due to a rise in appetite for risk. This could change though with the announcement of US GDP, which could trigger a spike in safe haven buying if the figures are negative. Japanese unemployment rose to 5.4% in the last month while deflation raced ahead of market predictions, with prices falling by 1.8% over the year.

The New Zealand dollar remained in low ranges against its trading partners yesterday after the RBNZ announced further interest rate cuts could be possible in future. The NZD sunk to a 12-day low against the pound while the Aussie was boosted by rising risk appetite in the market.

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The RBNZ voted to leave interest rates at 2.5% for the second month in a row, though stated that rates may be reduced further to avoid a strengthening currency which could undermine economic recovery.

The rising sense of optimism in the global economy has seen the New Zealand dollar strengthen throughout 2009. With financial forecasts predicting further improvement, Reserve Bank governor Allan Bollard claimed that further rate reductions could be used to keep the New Zealand dollar weak. This would drive demand for cheaper New Zealand imports. The NZD fell to USD0.65 in the lead up to the announcement.

The current New Zealand dollar exchange rate is GBP0.3960 and USD0.6528
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