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Sterling and euro exchange rates have trimmed losses against the US dollar this morning as rising retail sales in the UK and profits at Credit Suisse supported the currencies. US equity markets remain relatively quiet as investors digest news from Ben Bernanke’s speech, while revived risk appetite has strengthened the Australian and New Zealand dollars.

Pound Sterling – UK Markets

Sterling exchange rates have recovered ground this morning, as positive UK retail sales figures have led the pound to reverse its losses yesterday following the MPC minutes. This morning the pound has strengthened to 1.65 against the US dollar and 1.16 against the euro.

UK retail sales rose 1.2% in June, on track for a 2.9% increase this year. B&Q, Next and Morrisons have all reported rising sales and healthy forecasts as the summer heat wave boosted spending. While these figures tend to support the view of recovery in the UK economy, retail sales are a volatile statistic GDP estimates due on Friday could provide a better indication. The CBI has reported that 250,000 jobs may be lost in the manufacturing sector as factory orders fell to new lows in July. There is no further data in the UK today with a GDP estimate out tomorrow.

US Dollar – US Markets

US dollar exchange rates have dipped this morning as markets digest Bernanke’s speech and recover a little appetite for risk. The greenback has gained 0.76% against the yen and weakened against the pound and euro, currently trading at 0.6047 and 0.7025.

US markets had a relatively quiet day yesterday with the S&P finishing marginally down despite gains in European equities. The US dollar continued to be supported by risk trading as corporate earnings at Morgan Stanley came in worse than expected, sending the dollar higher against its international currency partners. Home sales and jobless claims are out in the US today and this will likely affect the US dollar exchange rate and risk appetite in the market.

Euro – European Markets

European exchange rates are holding firm this morning, trading at 1.42 against the US dollar and 0.86 against the pound. The euro has sunk against the Australian and New Zealand dollars as investors are prepared to take on limited risk.

The European current account deficit has narrowed to EUR1.2 billion in May, its smallest level in over one year. This is much less than the market expectation of a EUR5.8 billion deficit. Second quarter profits at Credit Suisse, Switzerland’s largest bank, have risen 29% as profits from trading and investments rose. The news sent shares in the bank 3.8% higher and has supported the euro this morning. Today is light for euro data with the PMI for manufacturing and services due tomorrow.

Other Currencies – Highlights

The New Zealand dollar inched closer to a nine-month high against the US dollar yesterday as rises in Asian stock markets boosted New Zealand dollar exchange rates. The Australian dollar also rose to a one-month high against the greenback, gaining to 81.89 US cents.

The Brazilian central bank has lowered interest rates by 0.5% to 8.75%, a new record low in the hope of stimulating the Brazilian economy. Domestic demand is still driving growth in Brazilian, with 4% expansion expected this year. Inflation is currently running near government targets of 4.5%, leading economists to speculate that interest rates could stay on hold at this level for sometime.

Federal Reserve chairman Ben Bernanke addressed Congress yesterday to give a cautious assessment of the US economy. Bernanke noted that while there are tentative signs of recovery in the US, there is not enough slack in the financial system for the Fed to proceed with tightening monetary policy. This knocked risk appetite in the market, snapping recent equity market gains and drove investors to favour the safe haven currencies.

Pound Sterling – UK Markets

The pound shed 0.57 pence against the euro yesterday as exchange rates dipped due to investor fears over the state of the UK budget deficit. This morning the pound has continued to decline, falling to 1.63 against the US dollar and 1.15 against the euro.

With government debt currently running at 56% of GDP, there are growing concerns over how the government plans to tackle the massive debt that could prove inflationary. Charles Bean noted that the weak pound is stimulating the economy through improved export prices and this is aiding UK recovery. This morning’s MPC minutes show the committee unanimously voted to leave QE levels unchanged, as they felt the slowing pace of decline meant no further stimulus was necessary in July. The MPC will meet again in August.

US Dollar – US Markets

US dollar exchange rates have strengthened following Bernanke’s speech to Congress yesterday in which he outlined US economic prospects. This morning the dollar has gained against all its major currency partners with the exception of the yen, climbing to 0.70 versus the euro and 0.61 against a weaker pound.

Ben Bernanke gave a cautious assessment of the US economy to Congress yesterday, stating that while there are “tentative signs of recovery” the situation is highly unstable and Fed policy will be focussed on “fostering economic recovery”. He also noted that unemployment will likely remain high into 2011 with a slow and gradual climb out of recession. With no tightening of monetary policy due in the immediate future, risk appetite took a hit, sending the yen and greenback exchange rates higher. The house price index is due today in the US.

Euro – European Markets

Euro exchange rates are mixed this morning, climbing against the higher yielding pound, Australian, New Zealand and Canadian dollars while losing ground to the yen, US dollar and Brazilian real.

Industrial new orders across the eurozone have fallen -0.2% this month, taking the annual rate of decline to -30.1%. This is in line with falling industrial production across the region as recession contracts almost all sectors of the economy. European equities gained 0.8% yesterday and the euro remains firm in the region of 1.42 against the US dollar. There is no further data in the eurozone today with current account figures due tomorrow.

Other Currencies – Highlights

Australian dollar exchange rates reached a one-month high against the pound overnight, as consumer inflation figures slowed to 0.5%, the lowest level in a year. In combination with negative news in the UK, this allowed the Australian dollar to consolidate on the pound. The news also suggests that the Reserve Bank will leave interest rates on hold for some time.

Japanese yen exchange rates have surged overnight, amid concerns over the pace of global economic recovery. The Japanese yen gained the most against the euro, South African rand and British pound as low risk appetite in the market led investors to seek out the safe havens.

Strong corporate earnings figures in the US and positive Chinese economic data supported risk and equity markets yesterday, sending currency exchange rates across Europe and Asia higher. The figures boosted market sentiment across the board and led to a US dollar selling session with exchange rates improving for the Pound, Australian and New Zealand dollars.

Pound Sterling – UK Markets

Sterling exchange rates are in familiar territory against its international currency partners this morning, trading at 1.63 against the dollar and 1.16 against the euro. The pound has also gained over 0.3% against the Australian, New Zealand and Canadian dollars on the back of improved risk appetite.

The rising UK unemployment rate put sterling under pressure yesterday as official figures showed unemployment had reached the highest level in 12 years. However the pound was able to trim losses with strong US corporate earning figures and GDP in China boosting appetite for risk in the market. There is no major data in the UK today, with sterling exchange rates likely to be affected by the results of the Philadelphia Fed released this afternoon.

US Dollar – US Markets

Exchange rates for the US dollar slid yesterday as strong corporate earning figures buoyed market sentiment and increased risk appetite. The dollar lost ground against the yen, pound and euro, although has pared losses this morning to currently trade at 0.71 versus the euro and 0.61 against the pound.

Minutes from the FOMC meeting released yesterday noted that any further funds from the Federal Reserve would depend on “the Committee’s evolving expectations for the economy”. The Fed have increased their economic outlook, revising growth figures upwards, but the rising balance sheet is an immediate concern. Strong corporate earnings from Intel and Goldman Sachs triggered a dollar sell off yesterday and the Philadelphia Fed manufacturing survey is due in the US today.

Euro – European Markets

The euro exchange rate climbed 1% against the US dollar yesterday, touching on 1.41 on the back of rising market confidence. The euro has since dropped back against the dollar, currently trading at 0.85 versus the pound and 1.40 versus the dollar.

European indices surged ahead yesterday, with French, German and UK stock markets all gaining over 2% following positive figures in the US and China. Consumer prices have declined in France for the second month in a row, falling 0.6% from a year ago due to lower energy prices. There is no data due in the eurozone today with construction output and the trade balance released tomorrow.

Other Currencies – Highlights

Overnight figures from China show annual GDP growth of 7.9% and industrial production growing 10.7% in the past year, supporting this GDP growth. Inflation rates are falling in China, declining 1.7% on the year, with annual retail sales down to 15% growth, falling from a peak of 23% last year. Overall the Chinese economy remains strong and this led to a wave of optimism in global markets yesterday, sending exchange rates higher for the higher yielding currencies.

Consumer inflation in New Zealand rose by 0.6% in quarter 2, slightly higher than the 0.4% forecast by the Reserve Bank. The New Zealand dollar gained over 2 cents against the pound yesterday on the back of strong profits from Intel and Goldman Sachs and has continued to gain this morning, currently trading at 2.55 to the pound.

The UK unemployment rate has posted its largest quarterly increase, climbing to 7.6% in the three months to May. Consumer prices have fallen in the eurozone for the first time and international foreign exchange rates are likely to be subject to movements in US markets today, with consumer inflation, industrial production and the FOMC minutes due.

Pound Sterling – UK Markets

Sterling foreign exchange rates are mixed this morning, climbing against the US, Canadian dollar and Brazilian real while declining against its European currency partners. The pound is currently valued at 1.63 against the US dollar and 1.16 against the euro.

UK unemployment has climbed to 2.38 million after the biggest quarterly increase on record. ONS statistics show unemployment rose by 281,000 in the three months until May, taking the official rate to 7.6% which is the highest in 10 years. Unemployment in both the US and eurozone is running at 9.5%. Inflation figures yesterday saw the pound strengthen as they added to the view that the Bank of England has room to leave interest rates on hold. There is no further data in the UK today.

US Dollar – US Markets

The US dollar has dropped sharply against the euro this morning, falling 0.6% to 0.71 after the publication of euro inflation figures. The greenback has also weakened against its international currency partners as investors diversify following the equity rally yesterday.

Today US markets are packed with data that will provide a current picture of the US economy and likely affect international foreign exchange rates. US consumer price inflation is due, along with industrial production figures which are expected to decline by -0.9%. This is given the lower number of auto assemblies following the massive downturn in GM and the Chrysler bankruptcy. The FOMC minutes are also due today and this will provide an insight into the Fed’s view of the economy at present.

Euro – European Markets

Euro foreign exchange rates have climbed this morning, breaking through the 1.40 level against the US dollar and rising to 0.85 against the pound. The euro is also stronger against its European currency partners as investors seek an alternative reserve with important US figures due this afternoon.

Consumer prices in the eurozone have fallen for the first time in June, dropping 0.1% from the previous month due to a decline in energy prices and reduced household spending. Despite the falling inflation Eurostat figures show none of the Eastern European nations set to join the eurozone have inflation rates low enough to do so. The maximum current rate for joining the eurozone is 2.6% at present. There is no further data in the eurozone today.

Other Currencies – Highlights

The Bank of Japan has left interest rates unchanged at 0.1% but voted to extend emergency credit programmes until the end of the year to help businesses ride out the recession. Governor Shirakawa said the financial conditions are improving in Japan although confidence remains low and the economy is due to shrink 3.4% this year. The yen has weakened overnight as global confidence improves.

China’s GDP statistics for quarter 2 are out this afternoon. As a key market for commodities and exports, continuing Chinese growth is integral to global economic recovery. Foreign direct investment in China has fallen for the ninth month straight as companies trim budgets to weather the recession.

The annual rate of inflation in the UK has fallen below the Bank of England’s 2% target for the first time in 21 months. Today’s calendar is packed with economic data that could cause a reshuffling of currency exchange rates that will potentially benefit some of the higher yielding currencies. Markets will focus on US retail sales figures and the producer price index out this afternoon.

Pound Sterling – UK Markets

Sterling currency exchange rates have recovered this morning, boosted by falling inflation rates in the UK. After touching on a five-week low against the euro and falling to 1.60 against the US dollar yesterday, the pound is currently trading at 1.16 and 1.63 against the euro and dollar respectively.

Consumer prices in the UK have risen 0.3% on the month to June yet the annual inflation rate has fallen to 1.8%. This is the first time in 21 months inflation has fallen below the Bank of England’s 2% target. The retail price index also rose by 0.3% in June and has fallen by -1.6% annually, dragged lower by a reduction in mortgage approvals. These figures could be interpreted positively by markets as an indication that inflation is levelling off. The DCLG house price index has fallen by -12.5% on the year, better than market expectations and inline with observations that the property market could be bottoming out. Tomorrow, average earnings and the unemployment rate are due in the UK.

US Dollar – US Markets

The greenback has lost ground this morning with currency exchange rates declining on the back of positive market data in the UK. The dollar has gained against the yen, Brazilian real and Swiss franc however, as investors diversify from the traditional safe havens.

US equity market staged a minor rally yesterday as a report suggested corporate earnings at Goldman Sachs could rise as much as 15% The S&P closed the day 2.5% up and the boost allowed sterling exchange rates to recover against the dollar. This rally however was complicated by the fact that Larry Summers, an economic advisor to the White House, commented that we may not have seen the bottom for GDP yet and underlying trends remain uneasy. US retail sales and the producer price index will be the focus of foreign exchange markets later in the day.

Euro – European Markets

Euro currency exchange rates are weaker this morning, sinking on the back of downbeat industrial production figures and increased risk appetite. After surging to a five-week high yesterday, the euro has lost 0.5% to the pound while posting gains on the yen, US dollar and Swiss franc.

Eurozone industrial production has fallen 0.5% in May, with the annual rate of decline running at -17%. This is a slight recovery from the -21.6% decline predicted the previous month but is still a massive knock to confidence in the euro. The EUR/USD currency exchange rate has found support at 1.39 after being rejected at 1.40 yesterday. Also this morning the German ZEW economic survey has fallen to -39.5 in July, in contrast to market expectations. As the largest economy in the region, confidence in the German economy is crucial and these figures are likely to affect euro sentiment throughout the day.

Other Currencies – Highlights

Hungarian inflation rates have also unexpectedly slowed in June, falling to 3.7% from 3.8% the previous month. This increases chances of an interest rate cut for Hungary as stable inflation and a less volatile currency are improving investor confidence in the forint. Currency exchange rates for the Hungarian forint have risen to 275.79 per euro this morning. After declining 16% against the euro in the last year, the forint has recovered 5% in the last three months.

Japanese stocks rose overnight, led higher by the US market rally and the expectation of positive corporate earning figures. The yen has lost ground as global confidence rises and markets await results of the Japanese election and Bank of Japan interest rate decision.

The Bank of England has voted to leave interest rates on hold and decided against expanding its quantitative easing programme, despite the downbeat outlook for the UK economy. Currency rates for the euro are stronger on the back of positive German economic data while the US dollar and yen have slipped following a small rise in risk appetite in the market.

Pound Sterling – UK Markets

Sterling currency rates have recovered slightly this morning ahead of the Bank of England interest rate decision. The pound has gained against the US dollar and Japanese yen, and is unchanged against the euro, currently trading at 1.15.

Today the MPC voted to keep interest rates on hold at 0.5% and maintain current levels of quantitative easing at GBP125 billion, despite the dire production and GDP figures released in the last week. Bank of England governor King has announced that economic recovery is expected to be a “long hard slog” and more action could be needed to kick-start a sustainable recovery in the UK. This morning’s figures show the UK trade deficit has narrowed to GBP-6.3 billion, the lowest level since June 2006. The interest rate decision is due at noon.

US Dollar – US Markets

US currency rates are mixed this morning as the dollar has gained against its Asian currency partners but weakened against the European currencies. In early trading this morning the dollar lost half a percent against the pound and euro, currently trading at 0.61 and 0.71 respectively.

The IMF released updated forecasts yesterday, revising global growth down to -1.4% this year, with a 2.5% expansion predicted in 2010. The report also announced that recovery in the G8 nations could be quicker than expected and the priority for governments should be devising an exit strategy from stimulus packages, while maintaining low inflation and steady growth. However the largely positive report failed to trigger gains in currency exchange rates, as markets were more interested in the results of the G8 summit. Jobless claims figures are out in the US today.

Euro – European Markets

Currency rates for the euro have strengthened this morning against its international currency partners, gaining 0.5% on the dollar and 0.9% on the yen due to increased risk appetite in the market. The euro is currently valued at 0.86 versus the pound and remains just below the 1.4 level against the US dollar.

The German consumer price index has risen 0.4% on the month for June, completing a surprisingly optimistic picture of the German economy this week. As the largest in the eurozone, a recovery in the German trade and export sector could be instrumental in helping to lift the rest of the euro economy out of recession. The G8 summit continues in Italy today, with economy top of the international agenda and the ECB monthly report is also due today.

Other Currencies – Highlights

Aussie and Kiwi currency rates rose against the euro and pound this morning, boosted by market optimism and the UK interest rate decision. Australian unemployment levels rose in June to 5.8%, a drastic rise from last year’s low of 3.9%. However this failed to disrupt Aussie currency rates too much, as the 21,000 jobs lost was largely in line with market expectations.

Central banks in Chile and Peru are set to cut interest rates today, after annual inflation figures in Chile fell below government targets. Chile has already reduced the base interest rate by 7.5% this year, more than any other central bank as the economy suffers due to declining export prices and reduced consumer demand. Economists are also predicting Peru will reduce its base interest rate to 2.5% for the sixth consecutive month following the affects of recession on the economy.

GDP for the first quarter has contracted -2.5% in the eurozone, a figure in line with market expectations and one that takes the annual rate of decline to -4.9%. Exchange rates for many of the high yielding currencies are lower this morning, particularly the pound which is under pressure in anticipation of trade balance figures and the MPC interest rate decision due tomorrow.

Pound Sterling – UK Markets

Sterling exchange rates hit a one-month low against the euro yesterday, the third consecutive day of losses as the pound was put on the back foot from weak industrial production and manufacturing data. This morning the pound has declined to 1.6 against the US dollar and 1.15 against the euro, sliding ahead of the interest rate decision tomorrow.

The first round of second quarter GDP predictions has arrived with the NISER predicting the economy will shrink by -0.4%. Halifax house pricing figures released this morning show that prices have declined -15% on the year, with a -0.5 decline in June partially reversing the 2.6% rise in May. Weak UK data is leading to speculation that the Bank of England will add to its quantitative easing programme and this has reduced support for the pound. Today is light for UK data with sterling exchange rates likely to be affected by trade balance and GDP figures out tomorrow.

US Dollar – US Markets

US dollar exchange rates have climbed this morning, continuing gains from recent days on the back of market risk aversion. The dollar is currently valued at 0.71 versus the euro and 0.62 versus the pound.

The G8 summit kicks off today although with Chinese President Hu Jintao delayed, debate over the status of the USD as the premier reserve currency is likely to be put on hold. Recent uncertainty in the market has led investors to flock to the safe haven dollar in droves, quelling doubts over the position of the dollar as reserve for the moment. The Japanese yen has also risen to six-week highs against the euro and pound on the back of uncertainty. Today in the US MBA mortgage application figures are released with jobless claims figures out tomorrow.

Euro – European Markets

Euro exchange rates reached a one-month high against the pound yesterday, boosted by bullish German data and weak figures from the UK. This morning the euro has continued to gain, currently trading at 0.86 versus the pound and 1.39 against the US dollar.

Euro exchange rates received a boost yesterday from German factory orders which unexpectedly jumped to 4.4%. This is in contrast to industrial production figures in the UK, where markets expected a 0.2% rise but in fact got a -0.5% contraction. This morning first quarter GDP figures for the eurozone show the economy contracted -2.5% in the first quarter, in line with market expectations. German industrial production figures are also due this morning and this is likely to provide further insight into how the eurozone economy is faring.

Other Currencies – Highlights

Australian dollar exchange rates reached a three-week high against the pound yesterday as weak figures in the UK and the RBA interest rate decision renewed optimism in the Australian economy. Consumer confidence in Australia also surged by 9% in July and new mortgage lending rose by 2.2%. However despite the positive data, the pound eventually trimmed losses to close the day up against the Aussie dollar following news that Asian economies face a steep climb out of recession. Internationally, appetite for risk is low and this is putting pressure on exchange rates for the Aussie and Kiwi dollar.