Sterling made gains against the kiwi yesterday, but rising risk appetite has supported kiwi advances today

Evidence that the UK economic recovery is strengthening enabled sterling to reverse a five day slide against the kiwi, closing up at 2.2341.

• Sterling clawed back nearly two cents, or 0.8%, in the wake of strong data referring to retails sales, credit lending, and a final upward revision to the GDP figure.
  
• Sales volumes at UK retailers bounced back to their strongest level for five months in September, reaching levels well above expectations, whilst the second quarter GDP figure in the UK was revised to just a 0.6% contraction.
  
• The positive data was offset slightly by a weaker-than-expected UK current account deficit, but investors seemingly overlooked this, with demand for the pound broadly rising.
  
• In trading this morning however, the kiwi has advanced, supported by a survey showing business confidence in New Zealand at a ten-year high, which fed speculation of a rise in rates.
  
• The kiwi also benefitted from a sluggish dollar and strength in the aussie, which supported appetite for riskier assets.

Positve UK data enabled the pound to reverse losses against the aussie yesterday

The pound reversed recent losses to gain 0.75% on the aussie yesterday in the wake of some positive economic data, which spurred investor demand.

• A GDP revision showed that British output contracted 0.6% in the second quarter compared with activity in the first three months of 2009, better than the previous estimate of -0.7%, according to the Office for National Statistics
  
• This data was supported by higher realised sales and an increase in net lending to individuals, which, together, underlined hopes that the UK should pull out of recession in the 3 rd quarter.
  
• The positive market reaction enabled the pound to distance itself from long-term lows hit recently against the aussie, though an increasing UK current account deficit may weigh on sterling’s recovery.
  
• In trading this morning, the Australian dollar has rebounded, already up 0.4% on the day, following better-than-expected month on month retail sales, which add to the case for a rise in interest rates as early as November.

An easing of risk appetite weakened the euro yesterday, but it has rallied back over $1.46 so far today

The single currency hit a two-week low against the greenback yesterday as a rise in risk aversion strengthened demand for the haven currency.

• The dollar rose for a second day as evidence that economies have yet to shake off the worst effects of the global recession spurred demand for the safety of the U.S. currency.
  
• Russia’s central bank cut its main interest rate, signaling that things are not as positive as they appeared previously, and spurring demand for the dollar.
  
• The greenback also found support following a disappointing US consumer confidence survey, which cautioned investors in their risk appetite.
  
• Comments from ECB President also weighed on the euro, with Trichet saying that he was in favour of the argument for a strong US dollar in the foreign exchange markets.
  
• The remarks were reflective of a concern regarding the strength of the single currency on the eurozone economic recovery.
  
• This morning, the single currency has stretched back over 1.46 as risk sentiment returns to the market, diminishing demand for the dollar.

More positive investor sentiment returned to the UK yesterday, supporting a slight pound recovery

Sterling reversed a four day slide against the dollar yesterday, supported by positive economic data that included another upward revision of the 2nd quarter GDP figure.

• The final gross domestic product figure showed that UK growth contracted by 0.6% between April and June, a narrower fall than the previous estimate of a 0.7% contraction.
  
• The revision is almost entirely due to stronger estimates of construction output than previously forecast, according to analysts.
  
• Sales volumes at U.K. retailers also bounced back more than expected to their strongest level for five months in September and are expected to remain steady in October.
  
• In the US, a confidence survey produced a figure below the level expected, which cautioned investors slightly, capping sterling’s gains and bringing it down from an intra-day high of $1.5989.
  
• However, the pound has continued to rally this morning, already up another cent and currently trading around 1.6060, following the strongest Gfk consumer confidence survey figure since January 2008.

The UK economy is showing signs of recovery, which has buoyed the ailing pound

In trading yesterday the pound picked itself up from 6-month lows against the single currency, gaining 0.7% as positive data buoyed investor sentiment.

• In a final revision, Britain’s second quarter GDP figure was reported as -0.6%, up from a previous revision of -0.7% and strengthening claims that the UK will exit recession in the third quarter.
  
• There was also positive data from the UK CBI retail sales index, which showed considerable improvement from last month, reaching levels well above expectations.
  
• Additionally, lending to individuals rose in August, reflecting both an increase in the willingness of high street banks to extend credit, and also improved consumer confidence in the market as they begin to take on more debt.
  
• In the evening, it also emerged that the BoE may not be planning to lower interest rates, backtracking from King’s recent comments, and enhancing the pound’s yield appeal.
  
• Sterling fared well following the day’s news, but its gains were capped as it was also revealed that the U.K.'s current account deficit widened in the second quarter to its largest level for nearly two years, as investment income narrowed.

Sterling fell just 0.03% against the kiwi yesterday, but has suffered in trading this morning

The pound slowed its rate of decline against the kiwi yesterday, falling just 0.03% as weak Asian trading dulled risk appetite.

• The pound slipped lower, but stemmed its rate of decline as demand for the higher-yielding currency was curbed following weaker trading on the Asian markets.
  
• Sterling has been broadly sold recently following comments from the King and BoE, however the strong European stocks prevented the pound from sliding too sharply yesterday.
  
• Major European and US stock indices climbed between 1 and 2%, firming up confidence in the global recovery, and lending slight support to the ailing pound.
  
• In trading this morning however, the kiwi has already advanced 0.7% following positive building consents data from New Zealand, which has encouraged investor demand.
  
• Analysts say that with stocks continuing to push higher and central banks not yet ready to unwind stimulus measures, the New Zealand dollar is likely to maintain its upward trend.

Aussie has advanced further vs sterling as talk of interest rate hikes is renewed

Sterling slid for the third consecutive day against the Australian currency yesterday as the pressure of recent events and statements continued to weigh heavily.

• The aussie pushed higher, gaining another 0.9%, as the pound failed to shrug off comments made last week that a weak currency was in keeping with the BoE’s policy.
  
• The aussie dollar was also supported from a rise in commodity prices, particularly gold, which rallied back above $1000 per ounce yesterday.
  
• Additionally, risk sentiment among investors returned as stocks in Europe and the US traded strongly, buoying demand for riskier assets.
  
• In trading this morning the aussie has continued to advance, supported by renewed talk that the Reserve Bank of Australia would start raising rates in November.
  
• The speculation came after a central bank watcher said the RBA was almost certain to hike rates by 25 basis points in both November and December, which would make the Australian currency an even more attractive bet for investors searching for bigger returns.

Dovish words from the ECB president dragged the euro lower against the dollar yesterday

Talk of a slow recovery in the eurozone strengthened demand for the dollar yesterday allowing it to recover 0.5% to 1.4618.

• Support for the single currency was curbed slightly following the words of European Central Bank President Trichet, who spoke yesterday of a slow recovery in the 16-nation region.
  
• The governing council of the ECB considers that it would be premature to declare the crisis over, stating that now was not the time to implement an exit strategy.
  
• Additionally, analysts have said that on the whole, although the euro / dollar price is biased to the upside in the medium term, the single currency is now being challenged by corrective weakness.
  
• The single currency has dipped lower again this morning, currently trading marginally below 1.46, as investors hold off taking positions ahead of important US data this afternoon.
  
• There is a consumer sentiment survey out in the US at 15:00BST, which is forecast to reveal improved confidence in the market, which could weaken demand for the dollar.

Pound fell lower against the dollar yesterday, but found some support to ease its rate of decline

Sterling fell as persistent bearish sentiment pushed it to an intra-day four-month low of $1.5796 against the dollar, before closing at $1.5882.

• The pound managed to pull back slightly from early losses after Chancellor Alistair Darling made a speech in which he reiterated the need to curb “reckless” bonuses.
  
• His comments suggested that the government would be taking forceful steps to firm up the fragile banking system which returned a certain amount of confidence to investors and prevented the pound from falling further.
  
• The pound also benefited from slight profit taking and rising stocks, but analysts said that despite expectations for improving economic data, the sterling / dollar price looks vulnerable to a further downside push with strong resistance materialising around 1.5750.
  
• This morning, sterling is trading marginally lower as investors await important economic data released in the UK and the US today.
  
• CBI realized sales are out in Britain at 11:00BST, whilst in the US, data from a consumer confidence survey at 15:00BST is likely to reveal improved sentiment, which could stem demand for the haven currency.

Pound edged higher against the euro yesterday and has consolidated its position this morning

Having traded in the red for most of the day, the pound rebounded in the afternoon to close the day marginally up at 1.0859.

• ECB President Jean-Claude Trichet in a speech yesterday stated that the European economy will likely recover slowly in the coming months.
  
• Trichet continued, saying that it was too early for the ECB to stop pumping liquidity into the economy or to raise interest rates, which slowed demand for the single currency.
  
• Additionally, data showed that consumer prices in Germany fell faster than expected in September, which was a steeper decline than the market had looked for, capping the euro’s gains .
  
• In the UK, Hometrack Ltd revealed that UK house prices increased by the most in two years during September as confidence in the property market improved, although the news went relatively unnoticed by the market.
  
• Second quarter current account data and a revised GDP figure are out today at 09:30BST with forecasts predicting slightly improved numbers from the first quarter, which could lend support to the pound.

Bearish sentiment towards the pound on Friday allowed the kiwi to make substantial gains

The kiwi dollar climbed another 1.2% on Friday, as demand for the high yield currency remained strong in the wake of positive economic data.

• Investors continued to move their funds into the riskier currency on Friday as data in the US revealed a strengthening economic recovery.
  
• Selling pressure on the pound was also high on Friday as comments from the BoE revealed their willingness to see the currency remain weak, undermining investor confidence.
  
• The kiwi also received support from a slight rise in oil prices. The New Zealand dollar tends to fair well when commodity prices are on the up owing to the nature of the economy.
  
• The kiwi has retreated in trading this morning though as investors turned away from riskier assets following hefty losses in the stock markets.
  
• Stocks turned sharply lower on fears over the strength of the economic recovery and concerns that markets had reached their peaks, which has enabled the pound to recover around 0.1% so far today.

The pound has reversed recent losses against the aussie, supported by rising risk aversion

The pound lost another 1.0% to the aussie dollar on Friday to close at 1.8373, as selling pressure remained strong.

• The aussie dollar reached a twenty-four year high against the pound on Friday, as King’s comments continued to weigh heavily on the pound.
  
• On Thursday, the BoE governor made it clear that he was not too concerned about the current weakness of the pound, and that he was in fact in support of its current value in order encourage a rebalance towards an export led economy.
  
• The news reaffirmed that interest rates would remain low for some time, which encouraged investors to sell the pound in favour of the high-yielding aussie.
  
• In trading this morning however, the aussie has capped its gains as weaker Asian stocks, soften demand for the Australian currency.
  
• Rising risk aversion has also sent the price of gold back below $1000 per ounce, which has put further pressure on the aussie, with pair currently trading steadily around Friday’s closing price.

The euro made ground against the dollar on Friday, but has relinquished its gains this morning

The euro made gains on Friday, following a two day slide, buoyed by improving economic data in the US, and closing at 1.4689.

• The single currency initially lost ground against the greenback as poor data on US core durable goods orders initiated a slight dollar rally.
  
• However, the euro erased early losses after data showed US consumer sentiment improved in September while sales of US homes edged higher in August.
  
• Consumer sentiment rose to its highest point since February 2008, supporting a rise in stock indices, which picked up from earlier losses, adding further support to the euro’s rise.
  
• Additionally, a G20 statement suggested that they aim to continue to provide support for the global economy, which put further selling pressure on the dollar.
  
• In trading this morning though, the single currency has lost nearly 0.5%, dropping back to around 1.4620 following a rise in risk aversion spurred by the Asian markets.

The pound fell below $1.60 on Friday, and rising risk aversion has seen it tumble further this morning

Confidence in the UK currency remained weak on Friday in the wake of comments made by Mr King and the BoE, with the price sinking below $1.60.

• Having initially fallen to a four month low of 1.5921 in the early hours of Friday morning, the pound proceeded to consolidate above 1.60, with analysts suggesting that a bullish correction was expected in the wake of Thursday’s plunge.
  
• However, bearish sentiment towards the pound soon returned, with traders continuing to dump the British currency on perceptions that the BoE would lag other countries in tightening its loose monetary policies.
  
• In the afternoon, a worse-than-expected reading in U.S. durable goods orders triggered a risk aversion rally, which also helped to send the pound back down near its intra-day low.
  
• Additionally, analysts noted that the pound’s slide led Japanese retail traders to liquidate sterling/yen long positions, adding further selling pressure.
  
• In trading this morning, the pound is down half a cent as a rise in risk aversion is spurred by weaker stock trading in the Asian markets.

Sterling continued to slide vs the euro on the run up to the weekend, but has capped its losses this morning

Sterling fell yet further on Friday on perceptions that the UK currency would be allowed to weaken to help the fragile British economy.

• The pound dropped to a fresh five-month low against the euro on Friday as traders continued to sell sterling following comments from Mervyn King that sterling’s fall was helpful in rebalancing the UK economy.
  
• Some analysts have suggested that these comments which have undermined the UK currency, have become a new policy tool with which the central bank can kick-start the economy.
  
• Pressure on the pound was also stemming from the UK’s budget deficit and continued speculation that the BoE might yet loosen monetary policy further.
  
• In trading this morning, slight profit taking has seen the pound cap its losses, with the pair currently trading around 0.15% up for the day.
  
• Market players say that the outlook for sterling does remain bearish though, and it is set to remain the weakest of the major currencies for some time.

Positive economic data from NZ, keeps the kiwi rallying higher vs sterling

The New Zealand dollar advanced for the third consecutive day yesterday, as demand for kiwi assets remained high and as sterling weakness becomes ever more apparent.

• The kiwi gained another two and half cents (1.1%) yesterday after the BoE announced that it was perfectly content with a lower currency exchange rate and was unlikely to initiate any type of tightening into its monetary policy for the foreseeable future.
  
• The kiwi also continued to be supported by positive economic data from New Zealand, which supported claims that the RBNZ is considering raising interest rates.
  
• The New Zealand currency has found support today after the G20 did not indicate any imminent withdrawal of stimulus measures, triggering a rush back into higher-yielding assets.
  
• Initially the kiwi lost ground following disappointing local trade data released late last night, but it has rebounded strongly, climbing 0.75% in trading so far today.

Aussie hits new highs on sterling weakness and a rise in demand for higher-yielding currencies

Selling pressure on the pound and demand for higher-risk currencies saw the aussie advance to a fresh twenty-year high of 1.8464 against the pound.

• Remarks by Bank of England Governor Mervyn King to a regional newspaper published yesterday underscored the central bank's lack of concern about the weakness of the pound, which sent the currency spiraling.
  
• The aussie received further support as investors shifted funds into higher-risk currencies after the US Fed bolstered expectations that interest rates would remain low for some time.
  
• Risk appetite was also encouraged after the G20 meeting, where a statement showed signs that that global stimulus measures would remain in place, buoying demand for the Australian dollar.
  
• In trading this morning, the pound’s downward trend has continued as confidence in the currency remains weak, with the aussie pushing on another cent with trading currently around 1.8450.

Euro lost ground vs the dollar following an easing in risk appetite

The greenback continued to rally against the single currency yesterday, buoyed by a rise in risk aversion, to close the day at 1.4660.

• The dollar was under pressure yesterday after Wednesday night’s Federal Reserve meeting left investors with the message that US interest rates will remain very low for a long time.
  
• The euro also made gains against the dollar as the German Ifo Business climate survey rose to its highest level in a year in September, though it did undershoot forecasts of a stronger advance.
  
• However, the US dollar turned higher in the afternoon, after a report showed that sales of existing homes in America unexpectedly dropped in August, the first decline in five months.
  
• The euro also erased gains after major central banks, including the Fed, announced they were scaling back some emergency lending facilities.
  
• These gains were added to as US stocks turned negative in the afternoon, which further eased risk appetite in the market.
  
• This morning, the euro has recouped some of its losses after a statement from the G20 encouraged speculators to sell the low-yielding greenback.

Sterling weakness drags it down below 1.60 following King's comments

The pound slid 1.7% against the greenback yesterday as momentum to dump the pound snowballed following comments from King that lent his support to a weak currency.

• Sterling was at a two and a half month low against the dollar after comments from Mervyn King left FX markets in no doubt the Bank of England was comfortable with a weaker pound.
  
• A meeting set up between the BoE and London-based economists to clarify policy also worried investors who maintained their bearish sentiment toward the pound, pushing it lower.
  
• An easing of risk appetite added support to the dollar after data revealed a decline in US existing home sales from the previous month and undershooting forecasts.
  
• Additionally, as the US markets came online, equity markets took a turn into the red, which supported demand for the haven currency, and brought the price to a close of $1.6064.
  
• In trading this morning, sterling has tumbled to a four month low against the dollar as a break of the 1.60 level triggered a wave of stop loss sales.

The pound's decline continues, as confidence in the currency is undermined

Sterling went into its steepest daily decline against the single currency in 5 months yesterday, losing 1.2%, after Mr. King revealed that he was content with the current value of the pound.

• Sterling hit its lowest euro price since early April, extending broad losses after Mervyn King said that a weak pound was supporting a necessary rebalancing of the UK economy.
  
• The euro was also supported by a further rise in business confidence in Germany. Although expectations for the Ifo economic survey were not matched in September’s report, the modest increase reflected optimistic future expectations for economic recovery.
  
• Demand was further eroded as the Daily Telegraph reported yesterday that the Bank of England was set to meet with economists in a "crisis" meeting designed to stem alarm and confusion over the QE program and the weakness of the pound.
  
• Additionally, once the pound broke below the 1.10 level, automatic sell off points were triggered, driving sterling down to a near six month low of 1.0922.
  
• The pound has slid further in trading this morning, losing another 0.5%, and currently trading around 1.0900.

Positive data from NZ keeps the kiwi advancing against the pound

Following positive news in New Zealand, the kiwi climbed strongly yesterday but had its gains steadily pulled back after the release of the MPC minutes.

• It was revealed early yesterday morning that New Zealand had officially exited recession posting a third quarter positive GDP figure of 0.1%, which pulled the price to a low of 2.2433.
  
• The report raised expectations that the Reserve Bank of New Zealand would move to tighten monetary policy sooner than previously forecast.
  
• However, the kiwi had most of its gains steadily eroded throughout the day’s trading after the minutes from the latest UK MPC meeting revealed no discussion over reducing current interest rates, with the pair closing at 2.2696.
  
• In trading this morning, the kiwi has advanced further, currently trading up nearly a percent, as fresh data from New Zealand showed that domestic consumer confidence jumped to a four-year high in the third quarter.

The pound has failed to sustain yesterday's rally against the aussie, plummeting over 2 cents so far this morning

The pound shot higher against the aussie yesterday after suspicions were quashed that the Bank of England may have recently considered further easing.

• Minutes from the latest MPC meeting revealed a more encouraging note upon the prospect of the UK economy, and signaled that currently no further extension of loose monetary policies were necessary, which supported demand for the pound.
  
• Additionally, the rise of recent risk appetite took a brief pause as traders awaited an interest rate decision from the Fed, which weakened demand for higher-yielding currencies.
  
• However, during Asian trading, the Tokyo’s Nikkei index rose 0.9% in its first day of trading following a three day holiday, which encouraged investor demand for the aussie, pushing it higher, and currently trading 0.7% up for the day.
  
• The aussie was also supported by a US statement that rates would remain low for some time, which buoyed investors to resume selling the US dollar in favour of higher-yielding currencies.

The dollar reversed its slide yesterday, buoyed by stronger equities, but has fallen back today

Despite a reassertion that US interest rates would stay low, the dollar advanced over half a cent against the single currency yesterday as global stocks went into decline.

• During early European trading yesterday, the intense selling pressure on the dollar abated amid caution ahead of the Fed’s rate decision, with the pair holding around the 1.4800 level.
  
• In the evening, the statement from the Fed confirmed speculation that rates would remain low for an extended period of time, which sent the euro to a high of 1.4841.
  
• However, the greenback rebounded strongly, as traders remained cautious of betting aggressively against the US dollar following a sudden slide in US stocks.
  
• With rates set to stay at near zero for some time, analysts say that investors are likely to quickly return to funding carry trades in dollars, sending it lower once more.
  
• Indeed, the euro has made ground this morning following a business confidence survey in Germany that showed improvement from last month.

The dollar climbed yesterday and has continued to do so strongly in trading this morning

Having rallied strongly in the morning, the pound relinquished its gains as equities fell, with the pair closing marginally down at 1.6339.

• In European trading hours, the pound continued to advance after the Bank sounded a relatively bullish note on the economy, saying there had been a “number of developments during the month with positive implications.”
  
• There was also no sign that the Bank discussed cutting the interest rate it pays on commercial bank deposits in an effort to boost lending in the UK economy, which Mr. King had spoke of last week, adding downward pressure to the pound.
  
• However, the pound lost around 0.75% of its value in the evening as the surprise fall in equities quelled demand for riskier assets.
  
• Additionally, the Fed statement in the evening had sounded a more hawkish tone than some had expected, despite confirming that rates would remain at near zero for an “extended time,” which also cautioned traders against over selling the dollar.

Pound was supported yesterday by the MPC minutes but has resumed its slide so far today

Sterling got a welcome reprieve from negative sentiment yesterday after BoE minutes revealed that there had been no discussion of cutting interest rates.

• The pound rallied sharply after the minutes of the Bank of England’s September monetary policy committee meeting calmed fears over a possible extension of its quantitative easing programme.
  
• The minutes showed a unanimous consensus to keep the Bank’s asset purchase plan at current levels and there was no discussion over a cut in the rate its pays on commercial bank deposits.
  
• The tone of the meeting was more encouraging than had been priced into the market, stating that “ growth in the second half of the year is likely to be positive,” returning demand for the pound.
  
• However, although the minutes did mention recent improvements in the economic and financial data, they did leave the door open to further policy loosening, which capped sterling’s rally.
  
• In trading today, the pound has plummeted nearly a cent, hitting a low below the 1.10 mark as decling stocks and another statment from Mervyn King weigh heavily on the pound's prospects.

Pound finds slight repreive in relatively upbeat minutes from the latest MPC meeting

It was revealed today that Britain’s Monetary Policy Committee in their last meeting decided unanimously to “continue with the announced programme of asset purchases.” Following a recent statement from Mervyn King where he announced the possibility of an interest rate cut, the pound plummeted in value, particularly against the euro, as investors priced this news into the market. However the minutes have revealed that the outlook for the UK economy is less negative than has recently been perceived.

There was no indication that the nine members had discussed cutting the remuneration rate that commercial banks were paid for holding their reserves with the BoE. Indeed various statements, sounded an encouraging tone, with “growth in the second half of the year likely to be positive.” The minutes also spoke of the possible “start of a virtuous upward spiral for the economy.” These comments were slightly offset by the lingering prospect of high unemployment and the likely long-lasting drag on aggregate demand from the financial sector. However, of note for investors was that the tone of the meeting was neutral and not the picture of a weak economic recovery that some had forecast.

Kiwi surges as NZ exits recession

The kiwi surged up nearly two cents (0.8%) against the pound yesterday, as positive economic data spurred demand for higher-yielding currencies.

• Government data early yesterday morning showed that New Zealand’s current-account deficit shrank to its lowest level since 2004, which buoyed investor confidence in kiwi assets.
  
• In addition, the Fonterra Cooperative Group, the world's largest milk exporter, boosted its milk-price forecast for the year ahead by 12%, a positive development for the economically important dairy sector, which supported demand for the kiwi.
  
• The kiwi also benefitted from a broader rise in risk activity in the market, as investors chose to sell the dollar in favour of higher-risk positions.
  
• New Zealand and has enjoyed more positive economic data this morning, with the country posting a positive growth figure in third quarter of 0.1%, higher than a forecast -0.2%
  
• The markets have responded strongly to the news, although it had been assumed for some time, with the kiwi advancing a further 0.8% in trading so far today.

Strengthening risk appetite raises demand for the higher-yeilding aussie

Sterling lost half a cent (0.3%) to the aussie yesterday, as a weak dollar encouraged investors into higher-yielding assets.

• The aussie made gains, buoyed by a weak dollar and a return to risk activity, and also taking support from the huge rally in its neighbouring commodity-driven currency, the kiwi.
  
• Also contributing to risk appetite and the broad dollar sell-off was an encouraging sign of a strengthening global economy, with the Asian Development Bank overnight declaring some Asian economies - including China and South Korea - are growing faster than previously forecast.
  
• Additionally, investors turned to higher-yielding currencies as most global stocks moved higher, triggering a new wave of risk-taking.
  
• In trading this morning, the Australian currency has continued to climb, again supported by kiwi strength, though at a much diminished rate, as investors await the minutes from the latest MPC meeting.

The euro made gains yesterday as investors sold the dollar ahead of the FOMC rate statement

The single currency broke over the 1.4800 mark yesterday, pushing up its yearly high against the greenback, as investors returned to selling the dollar.

• Rallying equity markets renewed signs that the global economy is set for recovery, diminishing sentiment toward the dollar, and spurring investors to buy higher-yielding assets.
  
• There are currently a number of factors which continue to work against the dollar, notably the improving economic conditions and the strengthening of risk appetite in the market, which have supported the euro’s climb.
  
• The US currency also weakened on speculation that the G20 meeting in Pittsburgh this week will call for a reduction in global trade imbalances that may cause further gains for currencies against the dollar.
  
• Trading on the dollar has slowed this morning with the price currently holding at around yesterday’s closing price, as investors await the Fed interest rate statement, released today at 19:15BST.
  
• Any sign that the central bank intends to continue its monetary easing measures beyond this year could send the dollar plummeting further.

Sterling posted gains aginst a broadly weaker dollar yesterday

Sterling reversed its slide yesterday, climbing 0.9%, taking advantage of dollar weakness and pushing on to a close of $1.6358.

• Rallying equities first in Europe and then followed on US indices, returned risk appetite to the market, putting pressure on the haven currency.
  
• Indeed the dollar suffered selling across the board yesterday ahead of the Federal Open Market Committee statement released this evening at 19:15BST, and the G20 summit later this week.
  
• Analysts expect the Fed to signal its ultra loose monetary policy will remain in place well into next year and the G20 to discuss rebalancing the global economy, a process that will almost certainly require a weaker dollar.
  
• The persistence of downward pressure on the greenback is likely to continue according to analysts, with investors increasingly favouring higher-yielding assets, which should keep the price high.
  
• Trading has been tightly range bound this morning, with the pound failing to hold its position above 1.6400 ahead of important economic information, and currently trading around 1.6360.

Pound / euro pairing is holding relatively steady as investors await the MPC minutes

In a muted day’s trading in the build up to the MPC minutes, the pound made marginal gains, buoyed by rallying global equities.

• Sterling initially hit a fresh 5-month low against the single currency yesterday at 1.1012, driven by euro strength against the dollar and underlying bearish sentiment against the pound.
  
• Perceptions that the BoE will remain behind its counterparts in ending their loose monetary policy are expected to keep downward pressure on the pound in the short term.
  
• Some analysts have noted that the pound does offer long-term value at current levels, but an extremely dovish BoE has undermined investor confidence, keeping the currency low.
  
• In the afternoon however, the pound was able to reverse its losses and advance 0.2% as rallying equities supported risk appetite.
  
• Trading this morning between this pair has remained subdued, with investors anxious of taking positions before the Monetary Policy Committee’s minutes are released at 09:30BST.

Pound halted its slide vs the kiwi yesterday but has plummeted as confidence in NZ economy strengthens

In reduced trading yesterday, the pound rallied as investors booked profits, but gave back gains as risk appetite returned to the market.

• Initially, the higher-yielding kiwi gave back some of its recent gains against the pound as investors consolidated their positions.
  
• With markets in Japan, Singapore and several other Asian countries closed Monday for holidays and with little data to go on, investors may have chosen to continue to take profits and pare back on riskier positions.
  
• Analysts noted that the tone appeared to be one of consolidation as the market focused on this week's key events, which include the FOMC meeting, and MPC minutes.
  
• However, the negative sentiment toward the UK economy, and falling equities weighted on the pound, allowing the kiwi to rally back up to 2.2936.
  
• In trading today the kiwi has extended its gains by over three cents (1.4%) after the New Zealand’s biggest dairy exporter, Fonterra, raised its forecast payout to farmers and the current account deficit unexpectedly plunged to a near five-year low.

Pound has failed to capitalze on yesterday's gains, already down 0.8% against the aussie today

A pullback in equity markets impacted negatively on investor appetite for riskier currencies yesterday, enabling the pound to rally slightly.

• Sterling reversed a five day slide against the aussie as traders booked profits following quiet trade in Asia, where markets in Japan, and Singapore were closed for holidays.
  
• With little data or direction in the aussie market, in the absence of commodity trading, investors took the opportunity to cash profits, which enabled a broadly weak pound to make slight gains.
  
• Additionally, with the US interest rate statement and minutes from the UK monetary committee policy meeting both being released tomorrow, there is also the potential for volatility in the market over the next few days which could leave traders exposed.
  
• However, the aussie has advanced strongly in trading today, owing much to the rally in the kiwi, which leapt to a 13-month high against the US dollar.
  
• Confidence in higher risk currencies has risen following upbeat news from New Zealand’s largest dairy exporter, helping the aussie to climb 0.6% against sterling in trading today.

Dollar rose broadly on a rise in risk aversion but the euro has rebounded strongly in trading today

The single currency fell further yesterday, mirroring a drop in equities as investors booked profits from an extended rally.

• Dollar rose broadly, extending its pullback from a one-year low against the single currency, as traders trimmed short positions in the US dollar following broad losses so far this month.
  
• Falling global equities also gave rise to a slight easing in risk appetite, which allowed investors to take profits in the recent rally in the euro and ahead of this week's Federal Open Market Committee meeting.
  
• However, in the afternoon, the greenback halted its climb and gave back some of its gains, following a slight rally in stocks with the euro climbing over half a cent from a day low of 1.4612.
  
• In trading today, the single currency has continued to advance amid speculation that the Fed statement tomorrow evening will reaffirm confidence in the global economic recovery.
  
• Analysts have suggested that there is unlikely to be a shift to an upward trend in the dollar, seen briefly yesterday, with forecasts that U.S. policy makers will soon signal a possible withdrawal of economic stimulus measures.

Pound slid vs dollar but has recovered back near 1.63 this morning

Heightened concern over the UK economy and an easing in risk appetite, saw the pound lose ground to the greenback yesterday, closing at $1.6214.

• The pound slid a further half cent against the dollar, as renewed fears over the UK economy were realised following the BoE’s quarterly report which stated that sterling’s long-run sustainable exchange rate may have fallen.
  
• The report added selling pressure to an already weak pound and strengthened investor sentiment now is not currently a good time to buy sterling from a risk-reward perspective.
  
• Haven demand was also supported yesterday as global equity markets fell with investors taking profits from last week's rally, which had propelled benchmark indices to year highs.
  
• With important interest rate data released in both the US and the UK later this week, investors were further encouraged out of risky positions, with volatility in the market likely.
  
• However, in trading this morning, risk speculation has returned to the market allowing the pound to regain yesterday’s losses against the greenback, currently trading just shy of $1.6300.

Sterling slid closer to €1.1000 in trading yesterday and has continued to slide this morning

Bearish sentiment toward the pound accelerated yesterday following a BoE report on sterling weakness in the wake of UK debt and banking concerns.

• The pound continued to fall to a five month low amid a warning from the Bank of England that foreign investors may not be as willing to purchase UK assets, due to an increased focus on the UK’s economic imbalances, thus hurting the pound's long-term exchange rate.
  
• There was positive data on the UK economy from a Rightmove survey that revealed a rise in UK house prices, but market reaction was muted, as the data failed to outweigh negative sentiment.
  
• However, the pound did not lose too much value, with a lack of major economic data keeping trade activity relatively subdued.
  
• There was also significant selling pressure on the euro following a general easing in risk appetite, which prevented it from making significant gains.
  
• Trading between the pair remains steady this morning around 1.1050, as investors continue to hold back from taking significant positions ahead of tomorrow’s MPC minutes.

Falling Asian stocks have enabled sterling to reverse its slide vs the kiwi

Broad selling pressure on the pound on Friday enabled the kiwi to advance another two cents (0.9%), with the price falling down to 2.2934.

• The pound suffered as the fragility of the UK banking sector was underlined with Lloyds Banking Group unable to break free of the government’s asset purchasing scheme due to a tightening of regulations.
  
• Also weighing on the pound was an increase in public net borrowing which fed into the story that the fiscal situation is not going to get any better any time soon.
  
• Overall, higher-yielding currencies traded down on Friday as weaker commodity markets and a rise in risk aversion hastened investors into haven currencies, but this was outweighed by sterling weakness, enabling the New Zealand currency to advance.
  
• However, in trading this morning, sterling has rebounded, paring its losses as demand for higher-yielding currencies was dampened by falling Asian stocks.

Sterling fell further on Friday but has pared its losses against the aussie this morning

There was no reprieve for the pound on Friday as it slid for the fifth consecutive day against the aussie, losing another cent to close down at 1.8744.

• Sterling came under broad selling pressure following news that Lloyds did not have the capital to break from the government’s asset purchase scheme, which underlined the financial instability in the UK economy.
  
• The U.K. currency also weakened after British Bankers’ Association data showed the cost of three-month loans in sterling between banks fell for a 13th day.
  
• However, some analysts have said that the Australian dollar may face headwinds in extending its gains as the Australian economy is recovering to pre-financial crisis level at a quicker rate than the broader global economy.
  
• In trading this morning the pound has slowed its rate of decline, as falling Asian equities weakened demand for the aussie.
  
• Both the Nikkei and Shanghai composite closed down slowing the Australian dollar’s advances, with the pair currently trading steadily around Friday’s closing price.

An easing of risk appetite has aided the dollar, recovering from 2009 lows against the euro

The dollar recouped some of its losses on Friday following a slight rise in risk aversion, bringing the price back to 1.4708.

• The dollar gained a respite as bearish commodity and equity markets provided a measure of haven demand and some support for the greenback.
  
• Additionally, investors trimmed their positions on Friday ahead of holidays in Japan and Singapore this week, although the trend for broad dollar weakness is seen as likely to persist.
  
• However, other analysts argue that with US short positions at their highest in over year, the oversold greenback could continue getting a reprieve over the coming days.
  
• Indeed, the single currency has continued to lose ground in trading this morning, sliding another 0.3%, as investors remain wary of taking positions ahead of the US interest rate statement being made later this week.

BoE comments on the pound's long-run recovery prospects have further weakened its demand this morning

Underlining instability in the British economy weighted heavily on the pound on Friday, losing 1.1% to the greenback to close down at $1.6270.

• Traders sold the pound after banking concerns resurfaced in the UK, undermining any improvement in sentiment toward London’s financial sector and the UK currency.
  
• Reports that tougher-than-expected capital requirements were likely to be applied to the proposed exit of Lloyds from the government’s asset-protection scheme sent the pound sliding to a two-week low of 1.6234.
  
• Friday also saw an easing off in risk aversion as investors remained cautious of holding positions over the weekend, which encouraged demand for haven currency allowing the dollar to broadly strengthen.
  
• Demand for the greenback also came as the rally in global equities slowed considerably as investors booked profits on the back of a consecutive 4-day climb.
  
• The ailing pound has slid further in trading this morning after the BoE said that sterling’s long-run sustainable FX rate may have fallen due to an increased focus on the UK’s economic imbalances following the credit crisis.

Pound slid further vs the euro on Friday, but has slowed its slide in trading this morning

Worries about the underlying health of the UK banking sector took sterling to its lowest point against the euro on Friday since April 27th at 1.1054.

• Britain’s currency dropped sharply against the single currency after it was revealed that Lloyds was forced to abandon a move to withdraw from the U.K. government’s asset protection plan, underlining the fragility of the banking sector.
  
• Signs of weakness in the UK and global banking sector tend to hit sterling hard given the large role that the financial sector plays in the British economy.
  
• Additionally, public sector net borrowing in the UK increased to £16.6 billion in August, which although slightly less than market expectations, was the third largest monthly borrowed amount since records began, further dampening demand for sterling.
  
• By contrast, the eurozone current account improved in July to post a €6.6 billion surplus, at positive levels for the first time since February 2008, strengthening demand for the single currency.
  
• In trading this morning, the pound has slowed its rate of decline, as sterling found some support in a Rightmove survey that revealed positive data on house prices.

The kiwi continues to post fresh 12-year highs against the pound today despite a drop in risk appetite

The pound gained 0.2% against the kiwi yesterday, as investors felt that they could have gone too long on high yielding currencies.

• Sterling reversed its slide against a strong kiwi dollar, building on the bullish run of European equities.
  
• Investors were also concerned that the strength of the kiwi was a result of over buying and was set for a correction, which resulted in slight profit taking.
  
• However, the pound’s downward trend has continued again in trading this morning, with the pound briefly posting a low below the psychological 2.3000 level, as concern for the stability of the UK economy resurfaces.
  
• It was revealed today that Lloyds did not have sufficient capital to spurn a government led asset protection scheme, which has sent the pound plunging, and is currently trading 0.5% down against the kiwi.

The pound has relinquished gains against the aussie yesterday and has continued to slide further today

Having gained steadily throughout the day, the pound lost ground in the afternoon as global equities stumbled, eventually closing 0.13% down.

• Sterling was able to reverse its slide in early trading yesterday, as the aussie fell victim to light profit taking, with investors forecasting that the higher-yielding currency may be unable to sustain its bullish run.
  
• However, the pound turned negative as reports that British regulators had set tougher-than-expected terms on Lloyds’ proposed exit from a government scheme.
  
• The report strengthened claims about the ongoing fragility of the British economy and allowed the aussie to recoup losses.
  
• Overnight, Asian markets followed those in the US in turning negative, pulling commodity prices down, however sterling has failed to capitalize on weaker demand for higher-yielding assets, currently trading 50 cents down for the day.

The single currency continued to advance yesterday, but has slid sharply today as investors covered short positions

The single currency advanced for the fourth straight day yesterday, reaching its highest point since September last year at 1.4768.

• Risk appetite was maintained yesterday, as better-than-expected unemployment claims in the US and strong building permits figures climbed to their highest point since December 2008.
  
• Additionally, the euro was pushed higher as the Philadelphia Fed business index rose to 14.1 points in September from 4.2 in August, beating market expectations of an increase to levels around 8.0, spurring investors to sell the greenback and buy higher-yielding assets.
  
• Movements in the markets though were relatively muted, with the euro struggling to break through the 1.4750 level.
  
• Some analysts are now hypothesizing that the dollar could be replacing the yen as the new carry trade, explaining its recent weakness.
  
• However, the selling of the greenback has abated today, allowing it to edge back up against the single currency, as investors cover short positions in the wake of the dollar’s slide during the week.

Dollar recovers over a cent against the pound as risk appetite eases

The pound relinquished gains yesterday as US markets fell for the first time this week, with the price closing down 0.3% at $1.6451.

• Sterling initially edged up against a weak dollar, as higher equities buoyed investor sentiment, with the FTSE on a five day rally.
  
• The dollar slipped further after data showed US housing starts and building permits in August rose to their highest level since November, raising risk appetite.
  
• Additionally, the Philadelphia Fed business index rose substantially in September, enabling the pound to briefly stretch over 1.6500.
  
• However, the dollar recovered it losses as US equities fell, with t he Dow Jones falling 0.08% and the Nasdaq down 0.30%.
  
• The greenback has continued to rally this morning, as investors reacted negatively to news that the FSA said that Lloyds Banking Group did not have sufficient funds to spurn the government’s Asset Protection Scheme.
  
• The dollar has already recovered over a cent (0.8%), as investors also cover short positions, with the price currently trading around 1.6340.

Sterling slides sharply on retail data and UK bank worries

The pound slid 0.5% against the single currency yesterday, as weak economic data and news concerning Lloyd’s bank reduced demand for sterling.

• Sterling wiped out early slim gains against the single currency after surprisingly weak retail sales data reinforced the view that UK interest rates will stay at record lows for some time to come.
  
• Retail sales remained unchanged in August from July, to disappoint market expectations of a 0.2% monthly increase, a sign consumers are cutting back on spending as unemployment rises.
  
• Separately, a survey from business group, the CBI, found that orders for UK manufactured goods remained weak , further dampening demand for sterling.
  
• However the real blow for sterling came following news that the UK had set tougher-than-expected conditions to the potential exit of Lloyd’s bank from a state-run scheme to protect its assets.
  
• The pound has continued to slide sharply this morning, already posting an intra-day low of 1.1098, as investor sentiment in the UK economy weakens further.

Kiwi gained further yesterday but has relinquished some of its gains in trading this morning

The kiwi gained another 1.2% in trading yesterday, closing at 2.3101, buoyed by consumer confidence and strong Asian stocks.

• The kiwi extended to a twelve and half year high against the pound yesterday, as risk was supported by a higher-than-expected industrial production figure in the US.
  
• One analyst said that in an environment of growing economic confidence, there was little on the horizon to shake the kiwi’s strength.
  
• However in trading this morning, sterling has reversed its downward spiral, currently trading around 0.2% higher.
  
• Data from New Zealand late last night revealed a decline in their Business NZ Manufacturing Index which has dampened demand for the currency, enabling the pound to make a slight recovery.

High commodity prices and risk appetite keep the aussie strong against the pound

The aussie continued to post decade long highs against the pound yesterday, as risk appetite in the market strengthened.

• Increasing optimism over the prospects for global growth boosted commodity-linked currencies, enabling the aussie to gain a further 1.1% against the pound, as well as achieving a 12-month high against the dollar .
  
• Indices in Hong Kong, Korea, and Taiwan all ended on Tuesday at their highest levels of 2009, reflecting buoyant investor sentiment in the region, with commodity-linked stocks leading the charge, and supporting demand for the Australian dollar.
  
• The aussie was also supported by further upbeat data released in the US yesterday, heightening investor confidence.
  
• The market is now pricing in a possible 50 base point rise in Australian interest rates, whilst by contrast the BoE has indicated that the economy may still be in need of further monetary help.
  
• In trading this morning the pound has capped its losses as investors await important UK retail sales figures for August, released today at 09:30BST.

The euro shows no sign of slowing its rally against the dollar, as investor confidence continues to improve

The dollar remained under pressure yesterday as an increase in America’s industrial output last month encouraged investors to sell the US currency.

• US economic data revealed that industrial output rose in August and the current-account deficit shrunk, bringing the figure under $100 billion, enabling the euro to advance further.
  
• The dollar traded at its lowest level this year as another report also showed America’s consumer prices climbed last month, encouraging investors to pursue higher-yielding currencies.
  
• Additionally, rising risk appetite, spurred by the words of Ben Bernanke, boosted global stocks, stemming haven demand and pushing the euro to a close of 1.4708.
  
• The single currency has now gained over 2.5% riding on improved investor confidence and expectations that the US rates are likely to stay rock bottom for some time.
  
• Analysts have warned that this upward trend is now extremely stretched and that the rally could soon run out of steam, with the price possibly in for a technical correction.

Continued selling pressure on a broadly weak dollar has allowed the pound to strengthen

The pound was able to stem recent losses against the greenback yesterday, as selling pressure on the US dollar increased.

• Sterling was supported yesterday morning as European markets opened up strongly following U.S. data on Tuesday that reaffirmed the world's main economy is about to return to growth.
  
• Confidence was further increased by comments from Federal Reserve chairman Ben Bernanke, who said the US recession was now "very likely over."
  
• However, the pound traded in the red for the majority of the day, unable to break through the 1.6500 resistance level, with a raft of US data in the afternoon, which included CPI figures, industrial production data, and an improved current account figure, failing to encourage demand for the UK currency.
  
• The pound did recoup losses though as the US markets came online and also opened strongly, reaffirming confidence in the global recovery, and diminishing demand for haven currency.
  
• Sterling has continued to rally this morning, currently trading up 0.2% for the day.

The pound slowed its rate of decline against the euro yesterday, as stocks continued to rally

In a choppy day’s trading, the currency pair eventually closed down at 1.1214, with strong equities helping to stem the pound’s decline.

• Yesterday, the pound initially pared its recent fall against the euro after confidence in the global economy saw European equities open strongly.
  
• However, demand for the pound soon ebbed away, as data showed that the unemployment claimant count rose by 24,400 in the UK in August, which despite being a declining figure on last month, brought the claimant rate to 5.0% of the workforce.
  
• Though the data was broadly in line with expectations, the figures were not as bad as some had feared, providing some respite for the pound.
  
• In the afternoon, as US markets came online, equities continued to rally, with the FTSE 100 reaching a 12-month high, which also prevented the pound from sliding too far.
  
• UK retail sales data is released today at 09:30BST, with forecasts predicting a slight fall, which could put added selling pressure on the pound.

Demand for sterling slides, whilst demand for the kiwi soars

The pound reversed gains made on Monday, falling over two cents against the kiwi (0.9%), as the likelihood of an early rate rise in the UK was diminished.

• Sterling suffered yesterday as bearish sentiment toward the currency gained momentum after BoE governor Mervyn King said he would consider cutting rates on commercial banks’ reserves held at the central bank.
  
• Additionally, global economic optimism, driven by strong retail sales and producer prices in the US coupled with a positive statement from Fed chairman Bernanke, pushed up higher-yielding assets like the New Zealand dollar.
  
• The pound fell 1.1% against the kiwi, closing down at 2.3383, and the pound is fairing little better in trading this morning, having already fallen a further 0.7%.
  
• With little data of significance out in New Zealand this week, the kiwi will continue to be heavily influenced by rising risk appetite which could see the currency continue to strengthen.

Aussie advances against the pound as risk appetite in the market strenghtens

Sterling continued to slide against the aussie yesterday, as confidence in the strength of the UK economy was put under pressure.

• Early gains for the pound, following a rise in house prices, were dashed in an inflation report in which BoE governor Mervyn King stated the central bank was considering lowering interest rates.
  
• Demand for the pound immediately fell, with the price falling from an intra-day high of 1.9326, to a close of 1.9089, a drop of 1.2%
  
• Mr King added that the British economy had probably started growing again but recovery would be slow and risks to inflation were still to the downside, which put further selling pressure on the pound.
  
• Overnight the Australian dollar has advanced further, supported by strong Asian stocks and rising optimism over the global recovery, with the pound now breaking thirteen-year lows, falling another 0.6% so far today.

Euro strengthens against the dollar as data spurs hopes of global recovery

Having gained steadily throughout European trading, demand for the dollar ebbed away yesterday afternoon following positive economic figures allowing the euro to strengthen.

• The dollar initially jumped after a pair of U.S. economic reports said retail sales rose 2.7% and producer prices rose 1.7% in August, both more than economists expected.
  
• Retails sales were spurred on by the government’s “cash for clunkers” scheme, though even without cars, sales still increased by 1.1%, reinforcing hopes that the economy is on the path to recovery.
  
• Additionally, New York’s Empire State manufacturing index revealed another growth in output, further strengthening demand for the greenback.
  
• However, the dollar abandoned these gains, touching a fresh 2009 low against the single currency, as investors moved into riskier assets in the wake of the positive data.
  
• In choppy trading, the dollar was unable to sustain its burst of strength, as the euro continued to consolidate the strong position it has accrued over the last fortnight.
  
• The CPI inflation rate is out in the US today at 13:30BST, with analysts forecasting the rate to hold steady at 0.1%.

King's statment puts selling pressure on the pound, allowing a broadly weaker dollar to gain

The possibility of further monetary stimulus in the UK economy sent the pound tumbling against the dollar yesterday closing down at $1.6488.

• The pairing, which had reached a 1.6655 high in early trading, reversed sharply as BoE governor Mervyn King explained that the central bank was considering reducing its deposits rate in order to discourage banks from accumulating reserves.
  
• In testimony before UK parliament, Mervyn King, governor, said he was looking at “reducing the remuneration” of commercial bank reserves.
  
• The potential for lower deposit rates and gloomy assessment weighed on UK government bond yields and pulled the pound down to an intra-day low of $1.6402.
  
• Additionally, in the US, positive economic figures supported the dollar as investors were prompted to return to the theme that the US is at the forefront of a global economic recovery.
  
• For months, the greenback has tended to fall following strong data as investors' willingness to buy riskier assets strengthens. That trend has shown signs of diminishing though recently, and resuming its more traditional correlation to economic data.

Pound slides sharply against the euro on speculation over possible interest rate cut

Sterling fell to a near four-month low against the single currency yesterday following Mervyn King’s suggestion of an interest rate cut.

• Sterling fell to a low of 1.1233 after Mervyn King said that the central bank was considering reducing the interest rate in order to provide a disincentive for banks to hoard cash, encouraging them to lend.
  
• According to analysts, such a move would effectively be an expansion of the central bank's quantitative-easing programme, and these monetary risks constitute a major hurdle for sterling.
  
• King’s statement stemmed an earlier rally in which sterling briefly advanced after UK consumer price inflation data came in stronger than expected in August.
  
• Figures showed UK consumer prices rose 0.4% last month to give an annual reading of 1.6%.
  
• Additionally, in the eurozone, data showed that German economic sentiment rose to 57.7 in September, higher than the 56.1 reading seen in August, which further supported the euro.
  
• The pound eventually closed down at 1.1247, with rallying global stocks failing to buoy the UK currency, and the price has continued to slide overnight, with trading currently around 1.1200.

Sterling plunges following King's statement

Sterling has taken a steep downward turn today following the words of BoE governor Mervyn King who said that the central bank was considering reducing the interest rate in order to provide a disincentive for banks to hoard cash with the central bank, encouraging them to lend. King expressed concern that credit was still not readily available to the consumer and that reducing the lending rate was “something we’re looking at.” This also raised concerns that BoE’s quantitative easing program may not yet be finished, given that more money may have to be injected if the banks continue to refrain from lending. The pound has fallen to a near four month low against the euro of 1.1278 and by two cents from its intra-day high against the dollar, as selling pressure mounts on the UK currency.

The pound has built on yesterday's gains following positive inflation data released this morning

Yesterday the pound recovered losses incurred at the end of last week, as the kiwi was stung by a market movement away from higher risk currencies.

• The pound reversed its downward slide, gaining nearly a cent (0.4%) as demand for the kiwi was significantly dulled by the easing of risk appetite.
  
• A trade dispute between the US and China, although not severe, was enough for investors to question whether they had oversold haven currencies, weakening the kiwi.
  
• The New Zealand dollar also continued to be held back by an unexpected fall in retail sales which weakened claims of an early rate rise.
  
• In trading this morning the pound has slowed its gains, currently trading marginally above yesterday’s closing price.
  
• With little significant data out in New Zealand to move the currency, investors will be focusing closely on figures released in the US today, as well as a speech by Fed chairmen Bernanke, for clues to current economic health and possible risk strategy.

Weak equities hurt the pound yesterday, but it has recovered against the aussie today following the words of the RBA

Having made strong early gains, the pound steadily lost value against the aussie throughout the day, eventually closing down at 1.9221.

• The pound was pushed down yesterday as the FTSE fell back below 5000 points, quelling demand for the UK currency.
  
• Although the stock markets rallied in the afternoon, illustrating that investors were willing to look past a trade dispute between the US and China and take on more risk, the pound failed to cap its losses.
  
• The Australian dollar has dipped this morning after minutes of the Reserve Bank of Australia’s last policy meeting gave little guidance to markets on when the interest rate would be raised.
  
• The RBA stated that before it could raise cash rates, it needed further evidence that the nascent recovery, both at home and abroad, could be sustained in coming months.
  
• Currently the pound is trading up near the 1.93 level again, as selling pressure mounts on the aussie.

The single currency made gains against the greenback yesterday, though is down marginally so far today

After sliding against the greenback yesterday morning, the single currency recovered to close the day up 0.3% at 1.4615.

• In early trading, the single currency relinquished its gains to a broadly stronger dollar as falling global stocks spurred profit taking and the US and China became embroiled in a trade related dispute.
  
• President Obama announced tariffs on certain Chinese imports over the weekend which acted as a catalyst for a dollar rebound, but analysts said that the move was unlikely to lead to a trade war, with the rebound itself proving relatively muted.
  
• Indeed just before the US markets opened, the single currency jumped up over half a cent in less than half an hour posting a nine-month high of 1.4650, with analysts expecting it to continue pushing higher.
  
• The pairing are trading steadily this morning around yesterday’s closing price as investors remain cautious of taking bold positions ahead of important US data due later today.
  
• Improved data on US retail sales and the Empire State manufacturing index, both released today at 13:30BST, could help return risk sentiment to the market, driving the dollar lower.

Sterling has begun to recover yesterday's losses as risk appetite returns to the market

Risk activity eased off yesterday in the wake of falling stocks and a trade dispute between the US and China, quelling demand for the pound.

• Sterling retreated from one-week highs hit against the greenback as weaker equity markets spurred profit taking in riskier currencies and as investors braced for a raft of UK economic data later this week.
  
• UK shares initially slipped 0.7%, while European major indices fell a percent, cutting demand for currencies considered to be higher-risk.
  
• A trading row between China and the US also dented risk activities, though analysts say that this is unlikely to put a lasting hole in the market’s appetite in the longer term.
  
• Equities rallied slightly in the afternoon as the US markets came online, enabling the pound to recover some of its losses, and closing down at $1.6582.
  
• Inflation figures in the UK have just been released, and are better than expected, which should support demand for the pound as the economy appears to be recovering.

Having slid against the euro yesterday, the pound is recovering to nearer 1.14 so far today

Sterling neared one-month lows yesterday, losing 0.75% against the single currency to close down at 1.1342.

• The eurozone was given a real boost after the European Commission predicted that the EU would return to growth in the third quarter, supporting demand for the currency.
  
• Additionally, investment demand in the pound was sapped as global equities, which have been influential in the pound’s direction in recent weeks, traded deeply in the red.
  
• Sterling also suffered as concern for the economic environment was rekindled following a report showing a negative credit outlook for UK banks over the next 12-18 months.
  
• In trading this morning though, the pound has begun to recover its losses, currently trading around 0.3% up for day, following data that revealed British house prices rose for the first time in more than two years.
  
• The German ZEW committee releases data on economic sentiment today at 10:00BST, and is forecast to produce an improved reading which will support demand for the euro.

Sterling has rallied against the kiwi today, as investor sentiment for the New Zealand dollar weakened

The pound continued to slide against the kiwi on Friday, closing at 2.3553, as strong Chinese data supported demand for the higher-yielding currency.

• The kiwi has fallen sharply this morning though as speculators reduced their risk activity following a retreat in Asian markets, which dented demand for commodity driven currencies.
  
• The New Zealand dollar also suffered after soft data revealed that the country’s retail sales dipped unexpectedly in July, and from a broadly rebounding US dollar, which was sent higher by investors covering short positions.
  
• The sales data showed a dip of 0.5%, against a predicted rise of 0.5%, which showed that consumers remain cautious about New Zealand’s economic recovery.
  
• New Zealand’s data calendar is relatively light for the rest of the week, leaving the kiwi likely to follow broader market events and direction.

Following a positive start, the pound has lost value against the higher-yeilding aussie

The pound continued to climb against the aussie currency on Friday, closing up at 1.9307, as investment sentiment in the pound remained strong.

• Earlier this morning, the pound reached a weekly high of 1.9476, as higher-yielding currencies suffered a broad sell off.
  
• A fall in metal and crude oil prices weighed heavily on the Australian dollar. US crude for October delivery fell to around $63.13 a barrel while copper was lower in Asian trade.
  
• However, the pound has fallen from early highs, with the aussie currently trading around 0.3% higher for the day.
  
• Looking ahead, investors will focus on the minutes of the Reserve Bank of Australia’s September policy meeting which will be released on Tuesday.
  
• Investors have recently pared bets of a rate increase in Australia in coming months after surprisingly soft retail sales data and a weak jobs report.

Dollar trading slightly higher against the euro today, as demand returns to the haven currency

The dollar pulled back from four straight days of losses against the single currency on Friday, as investors decided to book profits before the weekend, with the pairing closing at 1.4568.

• The dollar continued to descend lower on Friday morning after a string of Chinese data came in better than expected, adding to global recovery hopes, prompting investors to keep transferring funds to riskier and growth linked currencies.
  
• However, a survey showed that consumer sentiment in the US was improving, which sent the euro down to an intra-day low of 1.4557, as investors took the opportunity to book profits following a bearish dollar week.
  
• The single currency has continued to lose value this morning, partly as a 2.4% drop in Tokyo’s Nikkei share average prompted Japanese investors to trim long positions in higher-yielding currencies previously built on hopes for global recovery.
  
• However analysts believe that the dollar’s overall downward trend is still unchanged, and that what we are seeing at the moment is little more than a technical rebound.

Having gained on Fridat, the pound has fallen back today against a broadly stronger US dollar

The pound continued to rally against the dollar on Friday, reaching a fresh monthly high of 1.6740, before relinquishing its gains as investors cashed in on profits made.

• Sterling continued to be supported on Friday by the view that the Bank of England’s decision to keep monetary policy unchanged suggests the UK economy may be stabilising.
  
• Demand for sterling remained intact after U.K. producer prices increased for a sixth month in August with a reading of 2.2%, adding to signs the recession may be easing.
  
• Sterling also drew strength from a small rise in weekly UK department store sales announced on Friday, which added to signs domestic consumer demand may be recovering.
  
• However later in the day, the pound fell prey to profit-taking as investors felt they had gone slightly long, which brought it back to close at 1.6657.
  
• The dollar has rebounded over a cent in trading this morning (0.7%) as traders felt the currency had been oversold, though analysts are saying that this is only a temporary blip in the greenback’s downward trend.

Sterling is dropping back today against the euro as equities fall

The pound edged up further against the single currency on Friday, but has lost its gains today following weaker equities.

• On Friday morning, investor confidence remained high following Thursday’s BoE decision to leave QE unchanged, which added economic stability.
  
• Equity markets also continued to rally, with the FTSE gaining another 0.5% to close up over 5000 pts, supporting the pound’s recovery.
  
• Additionally, the PPI index rose by 2.2% in August, far more than expected, which encouraged hopes that the recovery is strengthening.
  
• However, sterling’s advance was capped, with the price unable to reach above 1.1461, and trading remained tightly bounded throughout the day in a range between 1.1420 and 1.1440.
  
• In trading today, sterling has dipped back below 1.1400 as investors check their risk activity as equities markets have fallen.

Strenghtening risk appetite for riskier assets, supports demand for the kiwi

Having advanced strongly following the BoE’s statement yesterday, the pound fell sharply against the kiwi as investors chose to cash in on profits.

• Demand for the pound strengthened yesterday as the UK economy was given a level of stability following the BoE’s decision to keep both interest rates and its asset purchasing scheme unchanged.
  
• In the wake of this news, the pound made strong gains against the kiwi, briefly reaching 2.3906.
  
• However, at this point, investors, speculating that the climb against a strong New Zealand dollar could not be sustained, chose to cash in on short profits made, which sent the pound tumbling back down to a close of 2.3644, a fall of 0.6% for the day.
  
• This morning the pound, having suffered a broad sell off, briefly recovered back over 2.3700, but has since slid further as demand for higher-yielging currencies strengthens amid a recovering global economy.

A strong aussie dollar fails to regain losses incurred against the pound

The pound continued to advance steadily against the Australian dollar yesterday, buoyed by renewed confidence in the UK economy.

• The pound advanced nearly a cent (0.5%) against the aussie yesterday, as investor demand returned to the UK currency as the BoE left both interest rates and QE unchanged.
  
• Having suffered recently from a lack of confidence in the economy, sterling was given firm support as the BoE’s decision steadied investor concerns about the strength of the UK’s recovery.
  
• The aussie also continued to suffer throughout the day from an increase in monthly unemployment, and soft retail sales for July, which undermined hopes for an early rise in interest rates.
  
• Robust Chinese economic data earlier this morning, which has boosted commodity linked currencies against the dollar, was unable to prevent the aussie from sliding further against the pound, which is currently trading another 0.5% up for the day.

Euro advances further aginast a broadly weakened dollar

A choppy day in this currency pairing eventually saw the euro advance 0.15%, its fifth straight day of gains against the greenback.

• The single currency was initially able to make strong gains against the greenback yesterday, hitting a new high for 2009 of 1.4611, after a report showed a drop in the number of US jobless claims last week.
  
• The improvement to 550K claims, supported investors’ recent demand for riskier investment in stocks, commodities, and currencies.
  
• However, data also showed that the US trade deficit for July widened by 16.3% to $32.0 billion, the biggest month-on-month increase since 1999, which dented risk sentiment and sent the single currency back below 1.4600.
  
• Early rises in European stocks also faded in the afternoon which put further selling pressure on risky assets, with the euro finally closing down at 1.4579.
  
• Better-than-expected Chinese data last night has put further selling pressure on the dollar, with the single currency continuing to advance this morning.
  
• There is a consumer sentiment survey in the US today at 14:55BST which will give investors a good indicator of the current level of confidence in the US economy.

Sustained selling pressure on the dollar supports demand for the pound

Sterling continued to gain yet further ground against the greenback yesterday, advancing another 0.6% to close the day at $1.6649.

• In morning trading yesterday, European indices fell back to trade in the red, with the FTSE heading back below 5000 points, which unnerved investors and put selling pressure on the pound.
  
• At midday though, the BoE announced that interest rates would remain steady at 0.5% and that the asset-purchasing programme would not be extended, as some had predicted, which enabled the pound to hit its highest point against the dollar since August 10 th, at 1.6684.
  
• The pound was also supported by a rise in risk appetite as US weekly employment change figures continued to improve.
  
• Earlier this morning, a raft of positive data emerged from China, adding to hopes of a global recovery, prompting investors to keep shifting funds into riskier assets, and enabling the pound to extend its monthly high to over $1.67.
  
• Light profit taking however has capped the pound's advances, with the pair currently trading around 1.6700.

Pound continues to rally as BoE returns a level of confidence to the economy

The pound was able to reverse a three-day slide against the single currency yesterday, as investor confidence was buoyed by the BoE’s decision not to extend the QE programme.

• Trading was strictly range bound yesterday morning, as investors were cautious of taking short positions ahead of the Bank of England rate decision.
  
• In the afternoon however, the pound advanced as the BoE left interest rates on hold at 0.5% and left its asset-purchase budget unchanged £175 billion.
  
• The pound recovered to trade well above the 1.14 level as improved investor sentiment toward the Britain's economic recovery strengthened demand for sterling.
  
• Weakening equities did cap the pound’s gains though to 0.45%, closing the day at 1.1416.

RBNZ statement has limited impact on kiwi, with sterling easing off only slightly

Having gained nearly 2 cents in two days against the kiwi, the pound has struggled this morning in the wake of the RBNZ rate statement.

• Yesterday, strong European equities were enough to outweigh solid commodity prices allowing the pound to gain further ground against the New Zealand currency closing 0.5% up at 2.3790.
  
• The FTSE in particular epitomised the impressive rebound in stocks that we have seen recently, surpassing 5000 points and encouraging demand for sterling.
  
• This morning however, risk sentiment has supported the kiwi as investors see through the modest statement issued by the Reserve Bank of New Zealand that warned further rate cuts were possible.
  
• The rate held at 2.50% which came as no surprise, the statement itself though spoke of a patchy recovery and a high New Zealand dollar that could stand in the way of true recovery.
  
• Investors were not too phased however, realising that threats of a rate cut were not too credible in the face of their recent economic forecasts.
  
• The kiwi is now trading marginally higher for the day, as investors await the BoE’s statement.

Poor data has hindered the aussie's progress, allowing the pound to regain losses

Disappointing retail figures and rising monthly unemployment in Australia has allowed the pound to rally its recent sharp losses against the aussie.

• Firm gold and commodity prices prevented the pound from gaining significant ground against the aussie dollar yesterday after a surprising drop in retail sales in Australia in July had initially dimmed demand for the currency.
  
• The pound, however, was able to move 0.5 cents further from the 13-year low hit on Monday as European equities spurred demand for the currency.
  
• Sterling has continued to make gains in trading this morning after data from Australia revealed a surprisingly big rise in unemployment in August, which undermined expectations for a rise in interest rates in the near future.
  
• Demand for the aussie has cooled following the data, even though overall unemployment remained steady at 5.8%, with the pound moving up 0.3% in trading today.

Euro made further gains as selling pressure mounted on the dollar

The single currency continued to extend its yearly high against the greenback yesterday, briefly reaching 1.4600 as risk sentiment showed little sign of easing.

• The dollar continued to be broadly sold, extending its sharp falls from Tuesday, as global equities continued on their bullish run, blunting demand for haven currency.
  
• Selling pressure on the dollar was also compounded as the continuation of rising gold prices increased the metal’s appeal as an alternative investment, and as oil rose to over $72 a barrel.
  
• Some analysts have speculated however that this currency pairing could be in for an imminent correction downwards as they expect the euro is trading in the ‘over-bought’ territory. A continuation of bullish risk sentiment though could see the euro push higher.
  
• Data on the US trade balance is released today at 13:30BST, with forecasters predicting a slight increase in the deficit which may support a return to safer assets.

Strong equities pushed the pound higher vs the dollar

Sterling achieved a new two-week high against the dollar yesterday, supported by a continuation of bullish equities, eventually closing up at $1.6546.

• After an unsteady start, sterling managed to gain further substantial ground against the US dollar yesterday after rating’s agency Moody’s said Britain’s triple-A sovereign debt rating was “resilient,” adding further weight to the economic recovery.
  
• Early trading was relatively modest however with UK trade data, that showed the country’s trade deficit narrowed slightly in July, having little impact on the market.
  
• However, in the afternoon, risk sentiment was buoyed considerably as the FTSE100 reached 5000 points for the first time since October last year, with the pound briefly climbing to 1.6589.
  
• Additionally, analysts have noted that the high price of gold has encouraged investors to move into metals to hedge against declines in currencies, which has put broad selling pressure on the dollar.
  
• In trading this morning, the greenback has capped its losses, regaining around 0.2% in value, despite yet another strong opening in European stock markets.

Sterling continues to trade in the red against the euro

A rally in equity markets was unable to prevent the pound from sliding for the third consecutive day against the euro yesterday, closing down at 1.1365.

• In early trading yesterday the pound held steady against the single currency, with minor data going relatively unnoticed, as the upcoming BoE’s rate decision prevented any significant movement.
  
• However, strong European stocks were unable to rally the pound, working instead to the benefit of the euro, which edged up another 0.2%.
  
• The pound is trading marginally lower again today, as investors await the BoE’s interest rate decision announced at 12:00BST, which could have a significant impact on the markets, as investors are able to gauge the depth of the UK economic recovery.
  
• Certain analysts are saying that there is a chance that quantitative easing may be extended, a policy which the minutes from the last meeting revealed Mervyn King was in favour of, which would risk sending the pound into another downward spiral.

European stocks boosted the pound vs kiwi yesterday

The pound managed to recover nearly a cent, 0.4%, against the New Zealand dollar yesterday as investment demand returned to the UK currency.

• Data showed that in July, production rose by 0.9%, which fuelled a wave of optimism about UK economic recovery.
  
• Bolstering the optimism was a forecast from the National Institute of Economic and Social Research which estimated that GDP rose in the third quarter by 0.2%, which, if correct, would suggest that the UK is out of recession.
  
• Sterling also received a boost from European stocks which continued their strong run.
  
• Trading this morning has seen the pound make further inroads into last week’s losses against the kiwi, currently up around 0.4%.
  
• The current strength of the kiwi will have investors around the world focused on the rate decision and corresponding statement released by the Reserve Bank of New Zealand at 22:00BST today, which could have a significant impact on the currency.

Sterling reversed slide against aussie, as UK economic recovery hopes were renewed

The pound capped its four-day slide against the aussie yesterday, buoyed by renewed support for the UK’s economic recovery.

• Following from positive services figures last week, the UK economy was given another boost as a manufacturing production reading came in higher-than-expected at 0.9%.
  
• Additionally, European stocks also continued to show strength, with the FTSE100 briefly pushing past 4950, which supported sterling’s rally.
  
• In Australia, figures yesterday showed that business confidence hit a 6-year high in August, adding to mounting speculation that local rates could rise in coming months.
  
• However, this data, which drove the aussie forward against the dollar, was unable to impact on sterling which repealed some of its recent losses to trade up 0.2%.
  
• The Australian economy suffered a setback this morning as retail figures for July were down on the previous month, which has put pressure on the aussie, allowing sterling to rise 0.5% in trading so far today.

Selling pressure was mounted on the dolla yesterday, with gold reaching $1000

The euro rallied strongly against a broadly weakened dollar yesterday, briefly reaching a yearly high of 1.4523 at 15:30BST before closing at 1.4474.

• The single currency gained almost exactly 1.00% yesterday, as rising risk sentiment, supported by strong equity markets, continued to put selling pressure on the greenback.
  
• The dollar suffered from a rise in gold prices, which reached its highest level since March 2008, as well as fresh concerns over its status as a reserve currency, with analysts suggesting that dollar selling pressure could continue over the short term as risk sentiment strengthens.
  
• The single currency was given further strength in the afternoon as the US markets opened up positive, encouraging investors to sell the safer currency.
  
• In trading this morning, the euro has continued to trade near its 2009 high, as investors continue to sell the low-yielding dollar in favour of riskier assets.
  
• Investors will be listening to the words of the Chicago Fed President, who speaks today at 13:00BST, for clues to the pace of US economic recovery, whilst in the eurozone, there are no major announcements.

The pound posted strong gains against the US dollar yesterday as risk aversion eased

The pound reached a two-week high against the dollar yesterday, building on gains made last week, to close the day up 0.8% at $1.6486.

• The pound made strong gains against the greenback yesterday, finding support from stock markets which rose on speculation that the global recession is easing, sapping demand for the currency haven.
  
• Sterling found further support from July’s manufacturing production figure, which at 0.9% was a good improvement from the 0.4% reading in June and helped to bolster demand for the currency.
  
• Additionally, traders cited gold’s rally above $1000 per ounce as a source of broad downward pressure on the US currency.
  
• These cumulative effects allowed the pound to briefly climb over two cents, to a high of 1.6558, as investors bought back in to the UK recovery.
  
• The pound has continued to rally again this morning, breaking above the 1.6500 resistance level, as risk sentiment remains high.

Early gains for the pound vs euro yesterday were lost as equities receeded from their highs

Having made early gains against the single currency, the pound stumbled in later trading, to close the day marginally below the 1.14 level.

• Sterling initially reversed Monday’s losses, recovering to 1.1451 as data revealed that manufacturing output rose at its fastest rate in one and a half years in July, which encouraged investment demand.
  
• The improved reading of 0.9%, which was three times what had been forecast, was helped largely by a sharp rise in car production which rose by 10.4% in July from June.
  
• The figures suggest that the UK economy has made a stronger start to the third quarter and may be on track to emerge from recession sooner than previously predicted.
  
• However, in the afternoon the pound was unable to capitalize on its early gains as the rally in equities appeared to favour euro investment, allowing the single currency to regain its value.
  
• Trading this morning has seen the pound edge lower as the European stock markets start trading in the red.
  
• The pound may be able to hold its value today if UK trade balance figures, released at 09:30BST, follow forecasts and show improvement in July.

The kiwi has relinquished gains made yesterday, as confidence in the pound returns

A strong rise in risk sentiment saw the pound fall further against the New Zealand dollar yesterday, to close at 2.3592, down 1.0%.

• Sterling traded around the lows it hit a couple of weeks ago as rallying equity markets eased risk aversion and spurred demand for higher-yielding currencies.
  
• Commodity driven currencies were the real winners yesterday, as investors relinquished haven positions in search of a greater yield.
  
• Confidence in the New Zealand currency also remained high as investors speculate on an upbeat statement from the RBNZ later this week, whilst speculators remained wary of a possible dovish statement from the BofE on Thursday.
  
• The recent rise for the kiwi has actually become an issue for Governor Alan Bollard, who has expressed his discomfort with its surge stating that the high rate may hamper New Zealand’s export led recovery.

The pound has reversed its downward trend against the aussie today on rising European equities

The pound fell for a fourth consecutive day against the aussie yesterday, driven by a broad rise in risk sentiment.

• The Australian dollar hit its strongest level in thirteen years against the pound yesterday as improved investor sentiment was sparked by reassurances from the G20, who pledged to continue with policies aimed at supporting the global economy following a meeting in London over the weekend.
  
• Although there was not a big market reaction to the G20 meeting, part caused by the US Labor Day holiday, the outcome was certainly pro-risk appetite, which strengthened demand for the Australian currency, driving the pound down 1.9098, a 0.9% dip.
  
• The aussie was given an additional lift by the first rise in Australian job advertisements in 16 months, which increased speculation that the Reserve Bank of Australia may raise rates before the end of the year.
  
• In trading so far this morning, the aussie has pared its gains as investor appetite towards riskier assets was tamed as Asian stocks traded in the red.

The single currency as surpassed its previous monthly high today against a broadly weaker dollar

The single currency continued to gain ground against the dollar yesterday, spurred on by a rise in European equities.

• The single currency found support against a broader weaker dollar yesterday as bullish European stocks eased risk aversion, weakening haven currencies.
  
• The single currency also made ground, as German factory orders revealed a further rise in the strength of their manufacturing industry.
  
• Data showed that factory orders rose a stronger-than-expected 3.5% in July, but the reaction was relatively subdued with the euro trading steadily up around 0.3%.
  
• In trading this morning, the euro is continuing to consolidate its gains, nearing the highs of 1.44 it achieved at the end of August.
  
• German monthly production figures are released today at 11:00BST, which are predicted to follow yesterday’s data in supporting Germany’s recovery, whilst in the US there are no major announcements.

Sterling has reversed yesterday's losses against the dollar, gaining a cent in trading this morning

On the Labor Day holiday, the pound fell back to $1.6347 against the greenback despite a general rise in risk sentiment.

• The pound initially edged up further against the dollar yesterday as risk sentiment was supported by gains in the European equity markets.
  
• The G20 ministers over the weekend pledged to maintain monetary stimulus which, although this came as no surprise, it was nonetheless supportive of risk and generated a rally in the European equity markets.
  
• Gains were short-lived, however, as speculation of further easing by the Bank of England later this week prevented the pound capitalising on the rise in risk sentiment.
  
• Analysts noted that trading was choppy yesterday due to merger and acquisition speculation after Cadbury rejected a £10.2 billion take-over bid by US conglomerate Kraft Foods.
  
• Sterling however has reversed its losses this morning, already creeping up near the 1.64 level, as investors speculate on positive British manufacturing production data released today at 09:30BST.

Expectations of further monetary easing kept the pound low agains the euro yesterday

Investors were cautious of taking sterling positions yesterday, with the pound losing 0.5% against the single currency to close at 1.1404.

• Sterling relinquished its recent gains against the euro yesterday as speculation of further easing by the Bank of England later this week overshadowed the market.
  
• Analysts have noted that policy expectations will be the main driver of sterling this week, with the majority of forecasters expecting the rate to hold steady at a record low of 0.5%.
  
• The single currency was also assisted by a stronger-than-forecast factory orders figure in Germany which reaffirmed the strength of the manufacturing sector’s recovery in the eurozone’s largest economy.
  
• In trading this morning, the pound has started to curb its losses, edging marginally lower, but holding around the 1.14 level.
  
• In the UK today, production data is being released at 09:30BST, with analysts forecasting a rise of 0.3% in July, a reduced figure from the previous month.

Kiwi dollar pressed higher against the pound on Friday, and has reached last weeks record highs already this morning

The pound continued to lose ground on Friday, losing a further two cents to close at 2.3844.

• On Friday, a report showing that US employers shed fewer jobs in August than economists forecast, encouraged demand for higher-yielding assets, supporting demand for the kiwi.
  
• The kiwi was also supported by Asian stocks which continued to rally, building on Thursday’s biggest gains in six months.
  
• So far this morning, the kiwi has continued to trade higher, once again taking direction from Asian equities which, led by Chinese stocks, were broadly higher.
  
• Data today also showed that New Zealand wholesales fell 0.9% in the second quarter, the fourth consecutive quarterly fall and, which has prevented the pound from sliding too far, currently trading just 0.1% lower for the day.
  
• Additionally, the treasury said that New Zealand has emerged from recession, but warned that a high currency threatened the fragile, export led, economic recovery.

Aussie continues to strenghten against the pound as strong equities heighten risk sentiment

The Australian dollar posted further gains against the pound on Friday as risk aversion eased following US payroll data.

• Having traded relatively steadily on Friday morning, the aussie was able to post strong gains in the afternoon as investors were encouraged into the higher yielding currency following the release of the US non-farm payrolls.
  
• Although the data released was ambiguous due to the rise in overall unemployment, investors chose to focus on the brighter side of the data, which eased risk aversion and increased demand for the Australian currency.
  
• The aussie has continued to trade strongly this morning as firm Asian stocks supported bids for riskier currencies.
  
• An upbeat job ads report released this morning added to the overall positive note in the Australian markets with sterling currently trading 0.25% down for the day.
  
• Analysts have warned that as markets are shut in the US today, thin trade could exaggerate any moves in the Aussie later today.

Euro made strong gains vs the dollar on Friday; continues to do so today with the US markets on holiday

The euro made strong gains against the dollar on Friday as risk sentiment was supported by US payrolls data, with the pairing closing up at 1.4296.

• The single currency initially fell against the greenback on Friday, after the US jobs report showed that the unemployment rate rose to a 26-year high of 9.7%, discouraging risk appetite.
  
• However a report also showed that non-farm payrolls declined by 216K, in August, an improved figure from the 276K revised drop seen in July.
  
• Reaction to this news was relatively muted reaction, but the single currency was supported as investors began to digest the information and realise the positive signs.
  
• The US stock markets were also supported by the data which in turn helped the euro as investors were encouraged away from their safe haven.
  
• Some analysts have speculated that the strengthening of the greenback following positive payrolls data could mark a further step towards the changing relationship of the dollar to economic data and risk sentiment.
  
• There is no economic data released today in the US as markets are closed, whilst in the eurozone, monthly figures on German factory orders are published at 09:30BST.

Despite mixed US non-farm payrolls data on Firday, sterling pushed higher against the dollar

Traders remained positive following mixed US payrolls data, which allowed the pound to climb to a high of $1.6409 on Friday before eventually closing at $1.6390.

• Early trading on Friday remained steady, with the pound edging up slightly against the dollar on strong European equities, as traders braced for important US employment figures.
  
• The data in the afternoon proved ambiguous though as traders tried to analyse the dual factors of improved non-farm payrolls, but greater overall unemployment, which rose to 9.7%.
  
• Following the news the pound did drop sharply from a daily high of 1.6386 but its losses were pared around the 1.63 level and it recovered to trade at pre non-farm levels as demand for the safety of the dollar was surprisingly limited.
  
• Analysts said that the worse-than-forecast rise in unemployment could prove a burden on household consumption and spell a very gradual recovery in the US, which may support the dollar value over the medium-term.
  
• There is no trading today on the US markets as it is their Labor Day, so movement is likely to be limited with the pair currently holding steady around the 1.64 level.

Sterling relinquishes Friday's gains against the euro

The pound climbed for the third consecutive day against the euro on Friday, supported by strong equities, to close at 1.1462, its highest point in over a week.

• Trading was particularly tight on Friday morning as investors were reluctant to put on big positions ahead of the August non-farm payrolls data in the US.
  
• However the data proved to be a mixed bag and had little impact on the pound / euro pairing, which continued to trade marginally in sterling’s favour throughout the day.
  
• The pound was supported though by a strong showing in the equity markets, which have held significant sway over the strength of the pound in recent weeks.
  
• Trading this morning has seen the pound slip from Friday’s highs, currently trading around 0.3% lower, with investors remaining wary of the UK’s recovery, following the words of the OECD that forecast a slower recover for Britain.
  
• In the eurozone today, data is released on Germany factory orders at 11:00BST, with analysts actually forecasting a 2.5% reduction from last month, whilst in the UK there are no major economic announcements.

US non-farm payrolls demonstrate market overreaction.

Overreaction in the currency markets was demonstrated effectively today in the pound/yen currency pairing following the US non-farm payrolls data. Immediately following the release of the figures, the pound plummeted sharply as demand for the relative safety of the Japanese currency was supported by the substantial growth in US unemployment, moving up 0.2% to 9.7%, its highest level in 26 years. However, this knee-jerk reaction, that saw the pound slide 88 pips in 6 minutes, was immediately reversed with the pound proceeding to advance a full percent to an inter-day high of 151.70 as investors realised the relative strength of the payroll data itself that saw fewer jobs lost in August than had been forecast. As investors began to digest the data, the rate settled back down to its morning trading price of around 151.80. This blip in an otherwise steady trading day between the two is a fine example of how trader ambiguity can lead to overreaction on the markets following significant economic information.

The pound lost ground against the kiwi yesterday, as investors were encouraged by positive data from the NZ economy

The New Zealand currency rallied yesterday with positive services data from the UK unable to support the pound, closing down at 2.4070.

• With investors awaiting New Zealand’s interest rate decision and the RBNZ’s accompanying statement next week, investors continued to take direction from the equity markets.
  
• A strong showing in Asian equities and a decline in the major European indices stoked demand for the kiwi pushing the rate down near the 2.40 mark, and making strong inroads into the losses it incurred earlier in the week.
  
• The kiwi also benefitted from stronger export prices on commodities this month, rising to 4.3% from 1.0% in July.
  
• Japan released a positive figure on their capital spending, which encouraged investors to move away from their haven in the yen and has driven the kiwi over a cent and a half (0.7%) higher against the pound so far today.