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Foreign exchange rates for the pound remain bearish, sinking to an 11-day low against the single currency yesterday following strong industrial orders in the eurozone. US markets are optimistic this morning amid speculation that Ben Bernanke will be reappointed for a second term, while Israel’s central bank has voted to increase interest rates by 0.25%.

Pound Sterling – UK Markets

Sterling foreign exchange rates continued to slide against the euro yesterday, touching on an 11-day low of 1.1461 following strong European data. This morning the pound is weaker against its major currency partners, sinking to 1.63 against the US dollar and still trading around the 1.14 level against the euro.

Sterling sentiment is weak at present, particularly against the US dollar and euro following news that the eurozone is emerging from recession. The UK is expected to return to growth in the third quarter, with markets predicting a 0.5% expansion and this morning’s figures show UK mortgage approvals have improved for the seventh month in a row, climbing 7.4% in July. There is no UK data today with the Bank of England’s Charles Bean due to speak this afternoon.

US Dollar – US Markets

US foreign exchange rates are stronger this morning, gaining on all its major currency partners with the exception of the Japanese yen. The dollar has gained 0.3% on the pound and 0.14% on the euro to trade at 0.61 and 0.70 respectively.

US markets have opened optimistically following speculation that President Obama will reappoint Ben Bernanke as chairman of the Federal Reserve for a second term. Bernanke is highly regarded for his handling of the financial crisis and the news has led to gains for the greenback this morning. The US housing price index and consumer confidence figures are due today.

Euro – European Markets

Foreign exchange rates for the euro reached an 11-day high against the pound yesterday on the back of positive economic data. This morning the euro has dipped against the US dollar to 1.42, while gaining against the pound and Australian currency to 0.87 and 1.70 respectively.

The 3.1% rise in European industrial orders announced yesterday added to the growing evidence that the eurozone is emerging from recession. This supported euro foreign exchange rates, sending the euro to a multi day high against the pound. This morning’s figures show seasonally adjusted GDP expanded by 0.3% in the second quarter for Germany, while Swiss unemployment has climbed to 3.95 million. There is no further data today.

Other Currencies – Highlights

Australian foreign exchange rates rose to a 13-year high against the pound yesterday, as risk sentiment drove appetite for the higher yielding currencies. A weak pound also helped the Aussie to the 13-year high, and the New Zealand dollar also posted gains on the pound. This morning the Australasian currencies have trimmed gains after Chinese equity markets dipped overnight.

Israel’s central bank has voted to raise interest rates by 0.25%, becoming the first central bank to do so. This has prompted speculation that other central banks will soon follow suit, and the Israeli shekel has gained 0.35% on the pound.

The pound remains weak this morning as markets digest news of a record budget deficit in the UK. The euro continues to rally following positive PMIs for the manufacturing and service sectors and the Canadian dollar was boosted yesterday by a recommendation to buy from Goldman Sachs.

Pound Sterling – UK Markets

Sterling foreign exchange rates have declined this morning as markets digest the record budget deficit announced yesterday. The pound has declined against its major currency partners, with the exception of the Australian and New Zealand currencies.

New that the UK is running a record budget deficit kept sterling under pressure yesterday, with the pound remaining in low ranges against the euro and US dollar. Rising government debt may have contributed to the MPC decision to increase QE levels by another GBP50 billion and rising retail sales did little to boost investor sentiment. There is no major data in the UK today.

US Dollar – US Markets

US dollar foreign exchange rates received a boost yesterday after negative jobless figures triggered a spike in risk aversion. This morning the US dollar is trading at 0.69 against the euro and 0.60 against the pound.

New jobless claims rose by 576,000 in the week to August 15, more than markets expected which led to a bout of risk aversion yesterday. US dollar gains were trimmed however by the Philadelphia Fed which showed manufacturing in the region expanded for the first time in over a year. This is an important snapshot of the region as a whole. US existing home sales are out this afternoon.

Euro – European Markets

Foreign exchange rates for the euro remain strong this morning, climbing against its major currency partners with the exception of the yen and Swiss franc. The euro is currently valued at 1.42 against the US dollar and 0.86 against the pound.

German PMIs for both manufacturing and services have shown positive results this morning, coming in at 49 and 54 respectively. This is in line with positive German data released earlier in the week, indicating that the eurozone’s largest economy is on the way to economic recovery. PMI’s for the eurozone are slightly worse, coming in just under the 50 mark. There is no further data in the eurozone today.

Other Currencies – Highlights

Foreign exchange rates for the Australian dollar gained nearly a cent against the pound yesterday, after the UK budget deficit came in at a record figure. News that the Philadelphia Fed has expanded helped raise foreign exchange rates for the Aussie and Kiwi currencies, through boosting international risk appetite.

The Canadian dollar has also received a boost after wholesale sales rose 0.6% in June, the first increase in 9 months. Goldman Sachs also recommended buying Canadian dollars against the US in the short term which sent the CAD to a weekly high against the greenback.

Sterling currency rates remain neutral this morning after the UK posted a record budget deficit in July, the lowest since 1993. UK retail sales also reported a modest rise, climbing 0.4% on the month. Today is light for economic data in the UK and eurozone, with the US leading index set to affect international currency rates.

Pound Sterling – UK Markets

The trend in sterling currency rates remains neutral this morning with the pound trading at 1.65 against the US dollar and 1.16 against the euro. The pound has also gained 0.3% against the yen and is up slightly against the Canadian dollar.

Sterling lost nearly a cent against the euro yesterday after the MPC minutes showed the Bank of England was split on its quantitative easing policy. CBI distributive trades also came in slightly worse than expected at -54. This morning’s figures show retail sales rose 0.4% last month and 3.3% on the year, while public sector borrowing is running at GBP8 billion. The US leading index could be a source of volatility for the pound later in the day.

US Dollar – US Markets

Currency rates for the US dollar are mixed this morning as the greenback climbed against the yen and pound while declining against the euro and Asian currency partners. The US dollar is currently trading at 0.70 versus the euro and 0.60 versus the pound.

The US leading index is released today and positive figures are expected to show the recession is drawing to a close. Recent figures show evidence of stock building, higher export levels and fewer job losses, though economists are quick to point out that there remain a number of large barriers to sustainable recovery, most notably unemployment which is set to reach 10%. The Philadelphia Fed is also released today and this will provide and important snapshot of the manufacturing industry.

Euro – European Markets

Euro currency rates rose this morning after a volatile day in equity markets yesterday. This morning the single currency is marginally higher against the pound, US dollar, Canadian dollar while declining against the Australian and New Zealand currencies.

European stocks have recovered this morning which could boost euro sentiment today. The ZEW survey for Switzerland came in better than expected at 18.6, and the trade surplus rose to CHF2.5billion. There is little data out in the eurozone today, with euro currency rates likely to be affected by the US leading index released this afternoon.

Other Currencies – Highlights

Currency rates for the Japanese yen fell against the euro and dollar overnight as a rebound in Chinese stocks improved risk appetite. The South African rand and South Korean won gained the most against the yen as higher yielding currencies rallied, boosted by optimism over global recovery.

Australian and New Zealand currency rates are lower this morning against the pound and US dollar, despite rebounding stocks in China. The Australian central bank has made a record AUD sale based on the view that foreign exchange markets are stabilising. The AUD has gained 18% against the US dollar and is currently trading at 1.20 per US dollar.

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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 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.

Both the ECB and the Bank of England opted to leave interest rates unchanged yesterday, at 1% and 0.5% respectively. The Bank of England also opted to leave QE levels unchanged. Today foreign exchange markets will be interested in US employment data and this could influence the underlying dollar trend in the coming week.

Pound Sterling – UK markets

UK foreign exchange rates have declined from the seven-month high against the dollar and five-month high against the euro earlier this week on the back of political uncertainty in the UK. Despite positive economic figures, news that the Labour government is facing MP resignations dragged the pound down to 1.60 against the dollar and 1.13 against the euro. UK foreign exchange rates have also declined against a basket of international currency partners.

The UK producer price index out this morning has hit a multi-year low, largely on the back of falling oil prices. Yesterday, the Bank of England voted to keep interest rates on hold at 0.5% and maintain current levels of quantitative easing. This led to investor optimism that the MPC plan to stimulate the economy may be working. However despite the positive news, the fragile political situation has been negative for sterling exchange rates. Today, foreign exchange markets in the UK are likely to be affected by US employment data and political news from the government.

US Dollar – US Markets

Results are mixed for the US dollar this morning as foreign exchange rates have been volatile in the run up to the release of US employment data. The dollar has declined against the pound and euro this morning, but has gained against the yen, Canadian dollar and South African rand.

Employment data released in the US today is likely to be the major influence on foreign exchange rates internationally as the labour market is central to global recovery. The current market consensus is for a 0.3% rise in the US unemployment rate to 9.1%. Yesterday the US currency dipped in response to concern over the dollar’s status as an international reserve  although this ground has been recovered this morning. Average hourly earnings, the non-farm payroll and official unemployment rate are released today.

Euro – European Markets

Foreign exchange rates for the eurozone have improved this morning with the euro currently trading above 1.4 against the US dollar and 0.88 against the pound. The euro has also gained against the yen and Canadian dollar while losing ground to the Aussie and Kiwi currencies.

The ECB left interest rates unchanged at 1% yesterday and President Trichet commented that they may remain on hold for some time, as the euro economy is expected to begin a gradual recovery in 2010. With the eurozone expected to experience a greater downturn than the UK, euro foreign exchange rates may be slightly bearish versus the pound in the short term. There is no data due in the eurozone today.

Other Currencies – Highlights

The Australian and New Zealand dollars rose for the third consecutive week against the yen as investors favoured the higher yields based on speculation that the global recession is abating. An interest rate decision from the Reserve Bank of New Zealand is due next week and the NZD could experience some volatility in the run up to this. In the meantime, global foreign exchange trends based on US employment data are likely to affect foreign exchange rates for the Kiwi and Aussie currencies.

The failure of General Motors to secure a buyer last night for its European operations has led to mounting concern over job security for auto workers in both Germany and the UK. After reaching a seven-month high against the US dollar yesterday, sterling has trimmed these gains but remains trading at firm levels against both the dollar and single currency.

Pound Sterling – UK markets

The sterling-euro exchange rate weakened slightly this morning although the pound is still trading at the top of recent ranges at 1.14 against the euro. The sterling-dollar exchange rate is currently in the region of 1.59 and the pound has gained over 1% to trade at 154 against the yen.

Concern is mounting this morning for British car maker Vauxhall after the breakdown of European GM talks last night. While the German government is set to play a large role in the negotiations, the UK government is facing criticism for its failure to protect British jobs and workers. In another corporate merger, Spanish banking giant Santander is set to take control of high street banks Bradford & Bingley, Abbey and Alliance & Leicester. The CBI distributive trends survey is published today and this is expected to provide further evidence that economic decline is easing in the UK.

US Dollar – US Markets

The US dollar has recovered against the pound and euro overnight with exchange rates climbing to 0.62 and 0.72 respectively. The dollar has also gained over 1.5% on the Japanese yen and has dipped against the Australian, New Zealand and Canadian dollars.

The dollar strengthened yesterday on the back of safe haven buying as investors worried that rising yields on US debt could hinder US economic recovery. The trillion dollar budget deficit could affect levels of quantitative easing in the US and this is putting the dollar under pressure. Figures released yesterday brought further evidence the property market is stabilizing with a rise in pre-owned home prices. Orders for durable goods and new home sales are released today and both are expected to have moderated in recent months.

Euro – European Markets

Euro exchange rates have had a bullish run on the US dollar and pound this morning, rising 0.2% and 0.45% respectively. After reaching a high of 1.40 on May 22, the euro exchange rate has dropped back to 1.38 against the dollar this morning and has risen 1.75% against the yen to 134.

All night negotiations in Berlin failed to secure a future for the European division of General Motors last night, with Italian car maker Fiat and Canadian auto manufacturer Magna the two buyers left in the running. The German government is playing a central role in negotiations and is expected to provide billions of euros worth of finance for the takeover. Unemployment in Germany has risen to 8.2% in May, up 0.1% from last month. The German government expects the economy to shrink 6% this year. Euro area economic confidence figures are released today and the eurozone unemployment rate is due tomorrow.

Other Currencies – Highlights

The New Zealand dollar has strengthened this morning following the announcement of the annual budget. Finance minister Bill English deferred tax cuts as a means of servicing New Zealand’s growing budget deficit and this prompted a positive reaction from the Standard & Poor’s which raised New Zealand’s credit rating. The NZD rose to USD0.61 and has climbed 23% against the dollar in the last three months. Sovereign debt is expected to peak at 43% of GDP in 2017.

The Japanese yen has fallen the most in eight weeks against the US dollar and has also slid against the euro amid signs the recession is easing. Domestically the Japanese economy remains weak as rising unemployment and low domestic demand force down retail sales figures. Retail sales slid by 2.9% in April, falling for the eighth consecutive month. There is a host of economic data out in Japan today including the jobless rate, household spending and industrial production figures for April.