Favourable Exchange Rates

Inflation figures released in the UK this morning show the consumer price index rose 0.6% in May. This is largely due to rising oil prices and is likely to benefit UK foreign exchange rates. The US dollar also gained ground overnight as the Russian finance minister expressed support for the greenback as the world's premier reserve currency.

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Pound Sterling – UK markets 
Sterling foreign exchange rates are mixed this morning, with the pound climbing against the US, Australian and Canadian dollar, while sinking against the euro, New Zealand dollar and yen. Yesterday sterling hit a new yearly high against the euro, closing the day at 1.1823.

Consumer price inflation figures released in the UK this morning rose 0.6% on the month, with an annual rate of 2.2%. The retail price index is also rising, indicating that there is inflation in the UK economy. This is largely due to rising oil prices as well as an upturn in the property market and is likely to be positive for sterling foreign exchange rates. Supermarket giant Tesco has reported a "solid" start to the financial year, with like for like sales climbing 4.3% in the first quarter. UK retail sales figures are due on Thursday. 

US Dollar – US Markets

Foreign exchange rates for the US dollar rose overnight, as equity markets and commodity prices declined with a bout of risk aversion. This morning, the dollar has trimmed gains against its major currency partners, declining to trade at 0.61 versus the pound and 0.71 versus the euro.

The greenback gained ground yesterday as Russia's finance minister expressed confidence in the dollar as a reserve currency. Russia is currently the fifth largest holder of US currency reserves. Equity markets opened the week on a negative note after the IMF warned that despite encouraging signs, the recession is not over yet. This triggered investor risk aversion and drove the dollar to a two-week high against the Australian currency. Today, foreign exchange rates are likely to be affected by building permits and the producer price index, released in the US today.

Euro – European Markets

Euro foreign exchange rates declined yesterday on the back of greater risk aversion from international investors. This morning, the euro has recovered ground, trading at 1.38 against the US dollar and 0.84 against the pound. 

The euro declined yesterday on the back of weak employment figures in the eurozone, as the economy shed 1.22 million jobs in the first quarter. European auto sales also fell at record levels in May. This morning ZEW figures show German economic confidence has risen to 44.8, following a reading of 31.1 last month. The consumer price index rose for in May by 0.1%, largely on the back of firmer oil, although the annual rate of inflation has sunk to 1.5% . The EMU trade balance is due tomorrow.

Other Currencies – Highlights 

The Australian dollar dipped to a two-week low against the pound and US dollar overnight, as equity markets and commodity prices fell. The Kiwi dollar dipped after a report showed domestic manufacturing contracted slightly. Foreign exchange rates for the Kiwi and Aussie dollar are likely to be determined by risk trading in international markets throughout the day.

Yesterday the Bank of Japan opted to keep interest rates on hold at 0.1% although the central bank was more optimistic about the economy, claiming that despite significant deterioration, economic conditions have stopped getting worse. The yen gained 1.6% on the dollar following the announcement.


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The rates quoted above are interbank rates. Client rates may vary according to the volume and timing of the trade.