Despite an easing of concern over the UK's debt, the pound remains under broad pressure, with the sterling/kiwi price below 2.24

The pound capped sharp losses incurred against the kiwi, clawing back over 2.24 on Friday in the wake of encouraging news from Moody's rating agency.

• The kiwi was softer on Friday, consolidating strong gains after the Reserve Bank of New Zealand shifted their policy to earlier rate rises.
  
• The pound was able to make slight gains, reversing early losses, after Moody's rating agency announced that it had no intention of cutting the UK's triple A rating.
  
• However, the pound has moved lower this morning, unable to consolidate its position as concerns linger over the UK's fiscal position.

Pound made marginal gains on Friday, but has levelled off this morning

Sterling found slight support after a sharp sell-off against the aussie earlier in the week, with sentiment improved following comments from Moody's rating agency.

• Negative sentiment built up against the UK on fiscal concerns eased on Friday after Moody's announced that they had no imminent plans to cut the UK's credit rating.
  
• Although it is still broadly accepted that Britain's debt issues may impede the recovery, the news from Moody's did allow the pound a brief reprieve.
  
• In trading this morning the pair are relatively level, unchanged from the end of week closing price and hovering around 1.78.

Euro is trading lower against the US dollar, with selling of the haven currency as risk improves now starting to fade

The single currency slipped to a one-month low of $1.4589 against the dollar on Friday in the wake of positive US data and as concerns over eurozone credit ratings weighed.

• The US dollar rose as gains in retail sales and consumer confidence increased speculation that the Federal Reserve will raise borrowing costs next year.
  
• The stronger-than-expected US retail sales, which rose 1.3% in November after climbing a revised 1.1% in the prior month, boosted optimism about the outlook for the world's largest economy.
  
• Analysts noted that there is currently a decisive shift into a new trading regime, with a move from of the prime funding currency away from the dollar into the yen.
  
• In addition, the euro continued to weaken on speculation the credit ratings of more European nations will be lowered. The economic situation in Greece and Ireland has been described by analysts as "intolerable," and they could need bailouts before the end of next year.
  
• The euro has firmed slightly this morning though, up 0.3% after news that Dubai had averted a possible debt default.

The US dollar is holding it strong position, with the price down in the low $1.60s

The pound edged slightly lower against the US dollar on Friday in the wake of positive US data, with the pair closing the week at 1.6260.

• Sterling fell against the dollar as stronger-than-expected US data lent broad support to the US currency, while worries about the UK's shaky situation continued to weigh on sentiment towards the pound.
  
• Consumer sentiment in the US increased to 73.4 for December, compared with 67.4 in the previous month. Forecast was for an increase to 68.8.
  
• Retail sales were also improved in the US, supporting the currency. That the dollar gained on Friday from positive news supports growing evidence that the currency is no longer being broadly sold as risk improves.
  
• However, the rating agency Moody's prevented sterling from sliding too far, remarking that the UK is in no imminent danger of a ratings downgrade.
  
• In trading this morning the pair are holding relatively steady and are likely to remain range bound with no major economic data out today in either the UK or US.

Pound was well supported against the euro at the end of last week, but is down again today

The pound reached a two-week high against the single currency on Friday as sentiment toward sterling improved, closing the day 0.7% higher.

• Sterling rose against the euro after a major ratings agency said Britain's top sovereign rating was under no immediate threat, although concerns about UK fiscal health remained.
  
• Moody's Investors Service said the AAA ratings of Britain and the United States were not under threat of a downgrade right now, although a worst case scenario foresaw a cut by 2013.
  
• Sterling showed little reaction to data showing British input costs rising at their fastest pace in a year in November, which added weight to the Bank of England's forecast for inflation to rise sharply in the short term before falling back.
  
• The euro was also under continued pressure with Greece and Ireland among countries in an "intolerable" economic situation that could lead to bailouts before the end of 2010.
  
• In trading this morning, the pound has relinquished its brief gains, with the price back in its mid 1.10 trade range.
  
• With little data out today, the markets may take direction from eurozone industrial production, which is expected to show a sharp fall in output following disappointing readings from both France and Germany.

Kiwi is trading strongly on the back of an upbeat rate statement from the RBNZ

The New Zealand dollar made strong gains yesterday, lifted by the prospect of the removal of monetary stimulus measures from the middle of 2010.

• The kiwi gained a further 1.2% on the poundafter the RBNZ, which as expected left interest rates on hold at 2.5%, said in its accompanying statement that if the economy continued to recover, conditions may support the removal of monetary stimulus "around the middle of 2010."
  
• Striking a hawkish tone at its policy meeting, the Reserve Bank of New Zealand signalled that it could follow other commodity producers such as Norway and Australia, and move to raise interest rates as early as next April.
  
• The New Zealand dollar was also given further support as Alan Bollard, RBNZ governor, indicated that he was less worried about the strength of the currency.
  
• In this morning's session the pound has pared its losses, recovering over a cent to bring the price back over 2.24.

Aussie continuing to trade strongly against a broadly weaker sterling

The aussie enjoyed another strong run yesterday, posting gains of 0.75% against the pound as investors bet on further interest rate rises in Australia.

• Strong employment data was a further boost to the pace of the Australian recovery and raised expectations that the RBA would move to increase rates at the next meeting in February.
  
• In the UK, the pound came under pressure on continued concern over the fiscal instability. The Bank of England left policy unchanged in their meeting, recognising the need to maintain stimulus measures.
  
• The size of the UK deficit, close to 12% of GDP, has raised concern the UK could lose its triple-A credit rating if it does not take sufficient action, which is weighing on the pound.
  
• The pound is trading slightly higher this morning as investors look to book profits going in to the weekend, with the price currently hovering around 1.78.

Euro is continuing to trade well below its 1.50 recent highs, under pressure from the financial health of certain eurozone nations

With little new information for the markets to take direction from yesterday, the euro/dollar pair held in range, eventually closing little changed from Wednesday's closing price.

• The single currency did post slight gains in the early afternoon session after a narrower-than-expected US trade deficit for October reduced safe-haven demand for the greenback.
  
• Data revealed that the US trade deficit narrowed in October to $32.94 billion from the $35.65 revised deficit in September, and against market expectations of an increase to around $37 billion.
  
• However, this was offset by US weekly jobless claims, which rose last week by 17,000 to 474,000, more than twice the market consensus of an increase by about 8,000 claims.
  
• Ongoing concerns over the fiscal health of Greece and Spain also capped gains on the single currency.
  
• Despite the higher-than-expected claims, the US equity markets traded on a positive note yesterday, which buoyed risk demand and enabled the euro to recover back over 1.47.

Little impact from the BoE statement yesterday, thought the pound is up against the USD this morning

Having given back early gains against the US dollar following the BoE announcement, sterling did find late support from higher equities to close the day on a positive.

• The Bank of England yesterday opted to maintain their quantitative easing programme, but did not expand it beyond the £200 billion already committed.
  
• Sterling had earlier stemmed losses from the previous day in the wake of finance minister Alistair Darling's pre-budget report and persistent concerns about Britain's fiscal health. But the pound did lose ground in the wake of the BoE decision with no mention of future rate rises.
  
• Until recessionary pressures ease we are unlikely to see the Bank unwinding stimulus measures, and further monetary easing will remain on the table.
  
• Sterling erased losses, though, after the US markets opened on a positive note, bringing the European equities out of the red and lending slight support to the UK currency.
  
• The pound is continuing to trade higher this morning, with the price currently nudging just over 1.63 as investors await key retail sales data from the US, released at 13:30.

Sterling and euro are trading within range, each under pressure from fiscal concerns

The pound relinquished early gains against the euro after the Bank of England made no mention of withdrawing extreme stimulus measures, with the pair closing near level for the day.

• As analysts had widely expected, the Bank of England kept its key interest rate on hold at a record low 0.5% and its quantitative easing asset-buying programme unchanged at £200 billion.
  
• Sterling had made some progress in the morning session, but gave these gains back following the BoE statement and as concern over Britain's precarious fiscal position continued to weigh.
  
• The prospect of low interest rates for an extended period will continue to put pressure on the pound, as policymakers are likely to wait for confirmation of economic growth in the fourth quarter of 2009, before they contemplate tightening policy.
  
• Chancellor Darling on Wednesday noted the daunting scale of spending cuts and tax rises needed to bring Britain's budget deficit into line, which means the BoE could be forced to keep monetary policy loose to compensate.
  
• With no new information for the markets, the sterling/euro pair traded sideways for the majority of the afternoon and evening session.
  
• This morning, the pound is marginally higher, but the pair are likely to remain tightly range bound throughout the day.