Kiwi suffered as risk aversion at the back end of last week, though stronger this morning

The kiwi dollar retreated to two and half month low against the pound on Friday as risk appetite took a sharp downturn as the Dubai debt issue deepened.

• The New Zealand dollar followed the broader market events and directions that unfolded at the end of last week with regards to the concerns arising over debt issues in Dubai.
  
• In response, sterling reached a high of 2.33 after a sharp pull back in risk activity saw investors trim their positions is the "riskier" currency.
  
• The kiwi is firmer this morning as investors are more confident and less risk averse after the UAE offered to help banks in Dubai, reducing fears of a debt default.

Sterling climbed higher against the aussie at the end of last week, but aussie buying as resumed this morning

The pound built on substantial gains from Thursday, hitting a three-week high against the high risk aussie dollar on Friday as investors pared back carry trades.

• Concerns over the Dubai defaulting on their debts led to a shift in risk sentiment at the end of last week, which dulled demand for the Australian currency.
  
• The sudden loss of risk in the market saw carry trades unwound as investor recouped their risky assets and bought back safe-haven currencies.
  
• The movement enabled the rally strongly against the higher-yielding aussie, posting a 3-week high of 1.8235, before capping its gains and closing the week at 1.8194.
  
• However, in trading this morning, the more common trend has resumed as fears that Dubai may not repay its multi-million dollar debt abated slightly, with the aussie rapidly recovering its losses as risk appetite returns to the table.
  
• The aussie is currently up over a cent against a broadly weaker British pound, which has come under pressure following a weak consumer confidence survey.

Volatility was high on Friday though the euro recovered to close the day near $1.50. It is climbing higher this morning

After a sharp sell-off, the euro recovered its poise to close the week just below $1.50, marginally down on the day against the US currency.

• Turbulence returned to currency markets towards the end of last week after questions were asked about the stability of emerging market debt.
  
• It should have been a relatively quiet Friday with the US effectively on holiday from Thursday onwards for Thanksgiving. But the lack of US trade only exacerbated volatility on foreign exchanges after Dubai asked creditors of its Dubai World holding company for a six-month standstill on debt repayments.
  
• In response, investors dumped risky assets in a knee-jerk reaction to the news, which saw the single currency drop near two cents in early trading.
  
• However, the euro was able to recoup most of its losses as European stocks recovered from their sharp losses on Thursday.
  
• Despite the Dubai shock, the dollar also remained subdued in the wake of the minutes from the Federal Reserve's latest meeting which appeared to give traders the green light to sell the US currency.
  
• In trading this morning, dollar selling has resumed after the United Arab Emirates offered emergency assistance to banks in Dubai, soothing market fears about a looming debt default.

Risk aversion remained high on Friday morning, though the pound did recover in the later sessions

Sterling initially plummeted to a three-week low against the US dollar on Friday, but recovered some 1.4% through the day to close only marginally down, just over $1.6500.

• Ongoing worries over Dubai's financial sector had the UK currency under pressure on Friday morning as concerns developed regarding the extent of the exposure of the UK banks to Dubai.
  
• In addition, trade continued to be volatile in a holiday-thinned market. US markets were on a shortened session after being closed the previous day for Thanksgiving Day holiday.
  
• However, the pound was able to recover some of its losses through the afternoon session as UK equities made a recovery, weakening demand for the haven currency.
  
• In trading this morning, the greenback is once again under pressure after Dubai soothed concerns about the looming debt default, which has encouraged investors to resume buying riskier currencies.
  
• Currently the pound is trading 0.2% up, despite a weak UK consumer confidence survey, with the price consolidating above 1.6500.

The pound made up significant ground to close Friday slightly higher than the euro

Having dropped to a one-month low of 1.0950 against the single currency on Friday morning, the pound steadily recovered to close the day marginally higher at 1.1010.

• Sterling continued to slide in early trading on concerns about the potential damage to the fragile UK banking sector from Dubai's surprise delay on debt repayments.
  
• On Wednesday, Dubai moved to restructure its biggest corporate debtor, Dubai World, and delay repayment on some of the company's $59 billion of liabilities.
  
• Major UK banks have made large investments in Dubai, which has exposed them to the financial problems facing the country. Additionally, Middle Eastern players have been big buyers of sterling in recent weeks.
  
• But the pound came off its lows as UK shares recovered, led by bank shares which were hammered on Thursday. London's FTSE 100 was up 0.8% on the day after falling sharply earlier in the session.
  
• In trading this morning the pound is approaching its one-month low against the euro after figures showed an unexpected fall in UK consumer confidence underlining ongoing weakness in Britain's economy.

Pound is moving higher against the kiwi dollar supported by an upwardly revised UK GDP figure

The pound posted gains of nearly two cents against the kiwi dollar yesterday as demand dulled for riskier assets following weak US data and lower equities.

• Kiwi was again under pressure as investors continued to take the opportunity to cash profits as risk appetite waned after the US 3Q GDP figure was revised downward.
  
• In addition, equity markets turned negative with US benchmark indexes opening with small losses, which supported a return to the US dollar, softening demand for the kiwi.
  
• The loss of risk appetite brought the sterling/kiwi price to a two week high back over 2.29, though a further reiteration of low US interest rates in the evening did see the New Zealand dollar trim its losses.
  
• In trading this morning, the pound has posted gains after the UK 3rd quarter GDP figure was revised upward.

Sterling posted gains vs the aussie yesterday but a bullish speech from an RBA official overnight has the aussie trading strongly today

The pound reversed its downward trend against the aussie, but closed someway from its intra-day high as investors started to sell the dollar towards the end of play.

• Risk appetite was soft during trading on the back of negative news from various parts of the global banking industry. In both China and Germany, banks were under pressure to raise funds, which dented demand for high-risk currencies.
  
• In addition, data showed that the US economy in the third quarter grew at a slower pace than previously estimated which reduced demand for higher-yielding aussie.
  
• Further adding to negative risk sentiment was a weaker-than-expected report on US home prices in September, which rose for the fifth straight month, but at a slower rate.
  
• In later trading though, the aussie pared its losses, finding support as a report from the US Fed reiterated the need to hold rates at their present levels.
  
• This morning aussie is broadly stronger following a speech from Deputy RBA Governor Ric Battellino, who said that, "with the economy having only recently entered a new upswing, it is reasonable to assume that we will see this growth extended for a few more years yet."

Euro enjoyed a late rally to post marginal gains against the dollar and is up over 1.50 today

Having held onto gains through most of the European and US sessions, the dollar slipped back late in the day to close marginally down on the euro.

• The greenback found support after data revealed the US economy had not expanded by as much as had been previously estimated, with its GDP figure revised downward to 2.8%.
  
• A wider trade deficit and lower nonresidential business investments contributed to the lower third-quarter GDP number.
  
• Risk appetite was also dented by concerns over the global banking industry. In China, there were reports that a number of banks would be forced to raise capital. In Germany, state-backed lender WestLB searched for funds to help unload toxic assets from its books.
  
• The euro recouped some of its losses though as a key measure of German business sentiment beat forecasts, triggering optimism the eurozone's biggest economy is recovering at a healthy rate.
  
• Additionally, a strong US consumer confidence survey figure encouraged investors to take up risk trades, buoying demand for the single currency.
  
• In the late evening, further pressure was mounted on the dollar after the Federal Reserve said it expected a slow recovery with high unemployment, affirming expectations it will keep rates low for some time.

US dollar moved higher against the pound yesterday, but is being broadly sold again this morning

The US dollar trimmed strong early gains against the pound after a Federal Reserve statement left a negative dollar tone in the market going into the close.

• Risk sentiment again seemed to be off the table in trading yesterday after the US 3rd quarter GDP figure was revised downward to show that the economy only expanded at a rate of 2.8%, down from a previously estimated 3.5%.
  
• The data showed a wider trade deficit and lower consumer spending than previously thought, which encouraged investors to drop riskier assets.
  
• In the UK, speaking to the parliament's Treasury Committee, BoE Governor Mervyn King said considerable uncertainty about the economic outlook remained and that it would still take a long time for the level of output to return to more normal levels.
  
• Analysts said the comments offered little new in terms of policy outlook for the economy, which kept the pound under pressure.
  
• In the evening though, the dollar came under pressure, capping its gains, after the minutes from the Fed's most recent meeting reiterated the need to maintain their low interest rate policy.
  
• Dollar selling has continued this morning, with the pound currently trading 0.75% higher, pushing the price back over $1.67.

Sterling edged lower against the euro yesterday, but has founds slight support in trading this morning

Having touched on twelve-day low against the euro in early trading, the pound recovered most of its losses to close the day just 0.1% lower at 1.1083.

• The single currency found early support after a strong reading of German business sentiment, which exceeded forecasts, instilled some optimism about the euro zone economy.
  
• The firmer than expected German sentiment survey offset worries over the banking sector brought on following reports that German regional bank WestLB was struggling to secure funding.
  
• The Bank of England's Treasury Select Committee remained cautious on the strength of the economic recovery yesterday saying that the UK economy still faces "profound challenges," fueling speculation the bank may extend asset purchases as the recession persists.
  
• The Bank's testimony offered little new insight into the outlook for monetary policy, which kept pressure on the UK currency.
  
• Market participants added that reports from ratings agencies focusing on the weakness of major banks around the world were also weighing on sterling, given the economy's dependence on financial services.
  
• This morning the pound has moved higher following the 0.1% upward revision of the UK's 3rd quarter GDP figure to -0.3%.

Strong commodity prices enabled the kiwi to post gains against the pound yesterday, but the sterling price has risen again this morning

The pound lost ground to the kiwi in trading yesterday, relinquishing strong gains made on Thursday of last week, as a surge in risk appetite boosted demand for the high-yielder.

• Strong equity and commodity prices on the European and US sessions were supportive of kiwi buying, driving the price higher. Oil reached up to $80 per barrel, whilst gold rallied to another record high.
  
• The New Zealand dollar is again under pressure this morning as Asian equities failed to rack the strong run on Wall Street. The Nikkei closed down 1.0% overnight.
  
• Currently the pound is trading up 0.5% today with the price hovering just below 2.28. Though analysts have said that the price could be susceptible to a break higher as investors seek to cash profits ahead of a US holiday this Thursday.

Aussie was stronger yesterday as risk strengthened, the reverse is true of trading this morning though

The aussie continued to climb higher against the pound yesterday, finding support as risk appetite returned to the market.

• Global equities climbed near two percent, which supported a move away from the dollar and yen safe-haven currencies, and into high-risk denominations.
  
• Gold reached another record high yesterday, breaching $1170 per ounce as concern over dollar weakness encouraged investors into the precious metal, which supported demand for the commodity-linked aussie dollar.
  
• However, Asian equities traded in the red overnight, which has dulled demand for the aussie, enabling the pound to posted gains this morning with the price currently back over 1.80.
  
• Analysts have noted that hedge funds have been among the biggest sellers of the aussie in recent days as they move to cash in profits before year-end.

Comments eluding to extended low interest rates in the US helped the euro climb back near $1.50

A return of risk appetite and dovish comments from a Federal Reserve official put the dollar on the back foot, enabling the euro to climb a full cent but was again capped below 1.50.

• The dollar was broadly weaker on Monday as risk sentiment improved on the back of gains of equity and commodity markets.
  
• In addition, a Federal Reserve official affirmed expectations that US interest rates would remain low for some time.
  
• St. Louis Federal Reserve President James Bullard said on Sunday that the US central bank should keep its mortgage-related asset buying programme beyond a planned end-date in March.
  
• In the afternoon, positive US housing data further dampened the currency's safe-haven appeal.
  
• The report showed an above expectations jump in existing home sales in October, which further spurred the market's risk appetite and added to bearish US dollar momentum.
  
• In trading this morning, the greenback has recouped some of its losses, bringing the price down to 1.4900 following weaker Asian equities and some investors closed dollar-short positions ahead of the Thanksgiving holiday.

Sterling posted gains against the greenback yesterday in the wake of stronger equities

Sterling posted gains over a cent against the US dollar yesterday as strong equity prices encouraged investors away from the haven currency.

• Sterling rose against a broadly weaker dollar on Monday, rebounding from two-week lows hit last week, as risk-taking sentiment re-emerged on views US monetary policy would remain extremely loose for some time.
  
• Stock markets on both sides of the Atlantic enjoyed strong gains with London's FTSE index closing up just shy of 2.0%, which boosted demand for the higher-risk UK currency.
  
• The pound also found traction as the market priced in an upward revision to the UK 3 rd quarter GDP figure. Positive economic numbers have supported claims that the economy did not contract by as much as was reported, which has lent support to the pound.
  
• However, in trading this morning the dollar has trimmed losses as Asian stocks failed to follow up a stronger day on Wall Street.
  
• Analysts have noted that trading is likely to be thin and price moves exaggerated ahead of the US Thanksgiving holiday on Thursday.

There was little movement in the sterling/euro price yesterday with little economic data to give direction

The pound closed down for the fourth consecutive day against the single currency yesterday, though trading remained range bound with the price just nudging below 1.11.

• The euro found initial support after data showed a flash reading of the purchasing managers' services index in the euro zone grew at its fastest pace in two years in November.
  
• PMI data from Germany and France was also supportive, though the market took little direction from the figures and sterling gradually recovered its early losses, buoyed by higher equities.
  
• In his speech in the afternoon, ECB President Trichet again reiterated his stance on the need for a strong US dollar. His comments had little effect on the sterling/euro price with the markets aware that no new information was being offered.
  
• Indeed the price remained tightly range bound throughout European trading hours, with little economic data for the markets to take their lead from.
  
• Trading this morning could be more volatile with the UK's Inflation Report hearings due to start at 09:45, which should give investors a good indication of the UK's economic outlook.

Kiwi was unable to make ground on sterling at the end of last week, but is up 0.6% in trading this monring

The sterling/New Zealand dollar price was held in a deadlock in trading on Friday as concern over the UK fiscal position was offset by investors paring back positions in higher-yield currencies.

• The kiwi was under broad pressure as market participants continued to trim their risk positions ahead of a holiday-shortened week in the US.
  
• The pound was also broadly sold following on from Thursday's surprisingly high borrowing figures, which has resurfaced concerns over the fragility of the UK recovery.
  
• In response, the pair held relatively steady closing at 2.2783, with neither currency able to gain an advantage.
  
• Looking ahead to this week, the pair are likely to continue trading within range as investors await important inflation data from New Zealand released on Friday.

Though the high yielding aussie was under pressure at the end of last week, it posted gains against a broadly weaker pound

Sterling slipped over a cent against the aussie on Friday, giving up gains made earlier in the week, after weak borrowing figures undermined confidence in the UK economy.

• The aussie was broadly weaker on Friday as investors continued to take profits as global equities held their downward movement.
  
• However, the pound lost ground as sentiment toward the currency remained bearish following concern over rising debt levels in the UK.
  
• The Australian dollar is trading strongly again this morning, bringing the price back below 1.80, as gold rallies to a new high above $1165 per ounce.
  
• Analysts have also noted that the aussie's rise has been amplified as investors unwind bets on near-term weakness in the currency.

The euro was under pressure on Friday but has rebounded against a weaker dollar in trading this morning

The euro slid a further 0.4% against the US dollar on Friday, coming under pressure as an easing of risk appetite buoyed demand for the haven currency.

• Dollar gained ground quickly across the board at the end of last week as profit taking extended from commodity currencies to other majors.
  
• Analysts also pointed to comments from Jean-Claude Trichet, president of the European Central Bank in explaining the euro's decline.
  
• In a speech at the European Banking Congress, Mr Trichet said the ECB would gradually withdraw the emergency cash it had pumped into the economy, to ensure it did not fuel inflation. Market participants are concerned that recovery could stumble as stimulus measures are unwound.
  
• In trading this morning, the single has recouped its losses, already up over a cent, in the wake of dovish comments from US central banker James Bullard.
  
• In his speech he supported extending the central bank's purchases of mortgage- backed securities beyond the first quarter of next year, bolstered the view that interest rates are likely to remain at record lows.

Risk appetite was off the table at the end of last week, buoying demand for the dollar

Sterling fell sharply on Friday, falling 1% to a two-week low of 1.6463 against the dollar, on concerns over the UK's fiscal health and waning investor appetite for perceived risky currencies.

• Concerns over the fragility of the UK's banking sector kept the pound under pressure, particularly as they coincided with investors taking profits on riskier currencies.
  
• Analysts noted that a worrying fiscal position is not new information as far as the pound is concerned, but the size of the deficit did surprise the markets, which decided to take the currency even lower.
  
• The moves were exacerbated as UK debt concerns coincided with falls in equities and commodities which encouraged traders to take profits on the recent rise in riskier currencies against the dollar and the yen.
  
• In trading this morning, the pound is up over 0.5%, climbing back toward 1.66 following comments from a US Fed policymaker that stated stimulus measures should be kept in place and ensure interest rates remain low.

Sterling was lower on Friday, undermined by weak public debt figures

The pound fell to a one-week low against the euro on Friday as it slid further in the wake of data on Thursday showing UK public finances deteriorated almost twice as fast as expected last month.

• The data resurfaced concerns that record debt levels could threaten the UK's triple-A debt rating, dampening demand for the pound.
  
• The euro was also under broad pressure on Friday as rising risk aversion kept higher-yielding currencies on the back foot. Consequently sterling stemmed is losses against the single currency, finding support at 1.1100
  
• In trading this morning, the pound has lost further ground as bearish sentiment remains built up in following last week's data.
  
• Currently the pound is trading 0.3% down and has dropped back below the 1.1100 level.

Kiwi slid sharply yesterday as traders bought back into the US dollar

The pound rallied over three cents, or 1.5%, against a broadly weaker kiwi dollar yesterday as traders sold off their higher-yielding investments in the wake of sliding stock prices.

• Sterling was able to hit a ten-day high against the New Zealand dollar, which came under pressure from profit taking in carry trades that had been put on earlier in the year.
  
• In addition, investors were quick to trim their holdings in higher-risk currencies in the wake of falling equity and commodity prices.
  
• Overnight, both the Nikkei and Shanghai Composite lost ground following similar falls in the US session, which drove the kiwi lower.
  
• In trading this morning, the pair are trading steadily around the overnight closing price. With little economic data out, the price is likely to take its lead from broader equity prices and profit taking habits.

Aussie came under heavy selling pressure yesterday as traders took falling equities as a sign to book profits

A raft of profit taking in higher-yielding currencies enabled a weak pound to gain ground against the aussie in trading yesterday, closing nearly a cent and a half up.

• After Wednesday's consolidation, markets reverted to selling risk yesterday amid much talk of early position unwinding for year-ends.
  
• Having been one of the year's best performing currencies, investors hurried to lock in profits in the aussie, with declines in both oil and gold reinforcing support for the lower-yielding currencies.
  
• Analysts gave noted that whilst the aussie is likely to remain strong going into next year with global interest rates still low, the Australian dollar is susceptible to further downward pressure as profit taking increases in the final weeks of the year.
  
• In trading this morning the aussie is recouping some of its losses, currently trading around half a cent higher hovering below 1.81.

As the year nears its end, the investors are beginning to cash profits, supporting the US dollar

The dollar gained ground versus the euro yesterday, as a weaker tone in equity and commodity markets reinforced support for low-yielding currencies.

• The rally in equity and commodity markets stalled yesterday, encouraging investors to pare back exposure to risk and buy back the low-yielding greenback.
  
• Analysts said some traders were already taking risk off the table heading into the year end, wary that the rally in risky assets may have been overdone and that economic data has not been as rosy as forecast.
  
• Traders also said that the bout of dollar buying this week has been partly seasonal with demand coming from overseas corporates ahead of the year-end in addition to investors closing their dollar shorts.
  
• The currency pair remains trapped in a stalemate between support at $1.4800 and resistance at $1.5050, with trader's sensitive of taking the price higher following recent efforts by the ECB to talk the single currency down.

Lower equities and an easing of risk appetite is keeping the dollar trading broadly higher

The pound was down another half a percent against the dollar yesterday following weak UK borrowing data and an easing of risk appetite.

• Data showed that Britain's public finances deteriorated at a much sharper pace than expected last month, taking public borrowing as a share of GDP to its highest on record.
  
• Analysts said the borrowing figures highlighted the need for the UK government to rein in borrowing or face the possibility of a ratings downgrade.
  
• The data also took the shine off positive UK retail sales figures, which saw sales rise 0.4% in October having stagnated in the previous two months.
  
• In addition, risk appetite was taken off the table after major European equity markets fell back over a percent, a trend which was followed on the US indices.
  
• Investors took the opportunity to continue taking profits from higher-yielding currencies, which gave the greenback further support.
  
• In the afternoon, a positive reading from the US Philadelphia Manufacturing Index did cap the dollar's gains, but it has made further ground this morning pushing the price down near 1.66.

The pound is continuing to recede from recent highs against the euro following further evidence of high UK borrowing

Sterling continued to lose ground to the euro yesterday as UK borrowing data underlined Britain's deteriorating finances, while a sell-off in high-risk currencies also kept the pound under pressure.

• Data revealed a much larger UK budget deficit for October than the market had anticipated. The figure came in at £11.4 billion, against a predicted rise of just £6.7 billion, which undermined demand for the pound.
  
• Underlining Britain's enormous debt burden and shaky recovery, the Organisation for Economic Co-operation and Development said yesterday that the UK needed a concrete plan to cut its ballooning budget deficit, while downgrading its 2009 GDP forecast.
  
• Data also revealed that UK retail sales rose at a rate of 0.4% in October following two months of stagnation. The figure took October's annual sales growth to its highest since May 2008, however the news was overshadowed by the budget deficit.
  
• Sterling was also under pressure following as investors broadly sold off risky assets in the wake of falling global equity prices.
  
• In trading this morning there is has been little change from the overnight closing price, though ECB President Trichet gives a speech at 10:30, which could lead to some market movements.

Sterling lost ground to the kiwi yesterday but is up nearly three cents today following a comment from NZ's opposition leader

The pound was lower in trading on Wednesday, coming under pressure from the minutes from the Bank of England’s latest committee meeting and closing down at 2.2446.

• The minutes revealed a lack of consensus among the committee members over the level of monetary stimulus measures needed at this stage of the economic recovery.
  
• The report also reiterated the slow growth prospects for the UK economy and warned that inflation rates could stay below the 2% target even well into 2011, which was another sterling negative.
  
• However, in trading this morning the kiwi dollar has been broadly sold as investors pare back their riskier positions.
  
• In addition, comments from New Zealand’s opposition leader on the method in which monetary policy should be conducted has given investors further reason to take profits.
  
• Currently the pound is at a 10-day high against the kiwi, up nearly three cents on the day, hovering above 2.27.

A weak aussie made hesitant gains against the pound yesterday following a dovish report from the BoE

Sterling dropped back half a cent in trading yesterday to hover marginally above 1.80 against the aussie as investors picked up on notes from the latest BoE policy meeting.

• The minutes reiterated the possibility of further reducing the base interest rate in order to ease credit conditions, a policy that many thought was no longer in question.
  
• However, the pound did not drop as sharply as it did elsewhere with demand for the aussie also under pressure as US equities traded in the red, dulling risk appetite.
  
• Analysts also noted that the investors remained cautious towards the Australian dollar after the RBA expressed hesitation over a further rate rise this year.
  
• The pound has recouped its losses this morning, climbing back toward 1.89. Analysts have cited the fact that investors’ are looking to lock in profits as year-end approaches following a long rally which carried the aussie to a 15-month high against the US dollar.

Euro made gains against the dollar yesterday but has relinquished them this morning as investors pare back "riskier" positions

The single currency traded strongly against the dollar, recovering losses incurred on Tuesday, to close the day back up near 1.50 at 1.4963.

• The dollar slipped back as the President of the Federal Reserve Bank of St. Louis, James Bullard, said past experience indicates policy makers may not start to raise interest rates until early 2012.
  
• The euro pared some gains after data showed tame underlying US inflation data and a decline in housing starts lasts month, suggesting a US recovery will be a slow one.
  
• US housing starts tumbled 10.6% in October to their lowest level in seven months, which did little to enhance the outlook for the economy and lent some support to the dollar.
  
• Analysts also noted that traders were taking profits yesterday in the wake of the greenback's biggest rise in three weeks, with fresh data doing little to alter the view that US interest rates will remain at record lows well into 2010.
  
• In trading this morning, the euro has once again relinquished its gains, currently trading down 0.6%, as traders take profits from carry trade currencies and pare back “risk” positions.

Sterling was under pressure yesterday as the minutes revealed indecision over the extension to QE

Sterling was under pressure in trading yesterday, losing half a cent to the dollar as a report revealed a split vote over the extension of quantitative easing among the MPC members.

• Sterling was pushed to session lows after the minutes showed a three-way split of the asset purchase scheme: one member had voted for an increase of £40 billion, where as one was in favour of no extension at all. The other seven all agreed upon the £25 billion that was actually implemented.
  
• Analysts noted that the inclusive nature of the minutes suggested that further monetary easing was still on the table, which weakened sterling.
  
• In addition, the committee discussed the merits of cutting the base interest rate from the current 0.5%. Although they concluded that it was not currently necessary, the mention of it dulled demand for the pound.
  
• The dollar extended gains after weak US housing data reduced appetite for risk. The Commerce Department reported that US housing starts dropped last month to an annual rate of 529,000, from a revised 592,000 in September.
  
• The pound has lost further ground this morning, currently down a further cent, as softer equities during the US and Asian sessions dampen risk appetite.

Bank of England minutes proved tough for sterling, which lost considerable ground to the euro

The pound depreciated for the first time in five days against the euro, losing 1.0% from its intra-day high at 1.1311 following the release of the minutes from the latest BoE policy meeting.

• Sterling lost ground after the Bank of England minutes revealed a three-way split in the decision to increase asset purchases by £25 billion at its meeting earlier this month.
  
• Among the nine Monetary Policy Committee members, one, David Miles, called for a £40 billion increase, while BoE chief economist Spencer Dale, favoured no increase at all.
  
• Analysts said the minutes left the question of whether the central bank will increase quantitative easing beyond its current £200 billion target largely unanswered. The door was open to more although such a prospect looked unlikely.
  
• Sterling also came under pressure after a survey showed that UK factory orders fell this month at their slowest pace since December, although export demand was at its strongest since April.
  
• Meanwhile, investors will be keeping an eye on any positive prospects for sterling from merger & acquisition talks as a bidding war mounts for UK confectioner Cadbury Plc.
  
• The pound may also find some support today should UK retail sales data, released at 09:30, follow market expectations and reveal a month-on-month rise.

Bank of England's MPC Committee meeting minutes

MPC Minutes show 3-way split on quantitative easing

The minutes from latest meeting of the Bank of England’s monetary policy committee have revealed a three way split over the size of the extension to the asset purchase programme. Seven members of the committee decided in favour of adding a further £25 billion to the quantitative easing budget. However, David Miles voted for an extra £40 billion to be added in order to provide greater insurance against the downside risks to growth and inflation. Conversely, Spencer Dale believed that the risks facing the UK economy were best balanced by maintaining the current level of asset purchase programme unchanged at £175 billion.

The news is inconclusive. With one person on either side of the QE decision, there is little fuel for those who believe the BoE may now have concluded its asset purchase scheme. Neither does it look any more likely that there will be an increase to the budget in February when the current £200 billion is due to run out.

The report also shows that, while the members unanimously voted to hold rates at 0.5%, the committee did discuss cutting the interest rate in order to ease monetary conditions further. Although they concluded that such a move would not have a significant impact, they agreed that it may yet be a useful tool for the future.

Currently the market has taken the pound lower, with investors picking up on dovish comments that reiterated the slow recovery in the level of economic activity. Despite data in the manufacturing and services sector showing above-expectation improvement, the BoE is clearly remaining cautious. There are still significant headwinds which could impede recovery.

Having dropped around 40 pips against the euro on the immediate release of the data, the pound has made a slight recovery and currently trading steadily against the US dollar.

Pound posted gains against a weaker kiwi yesterday as a stall in risk appetite weakened demand for the higher-risk currency

Having climbed strongly against the kiwi in the European session, the pound capped its gains, sliding back slightly to close the day 0.4% higher at 2.2554.

• The kiwi lost ground yesterday as risk appetite took a step back, easing demand for higher risk currencies.
  
• In the US, a government report showed US producer prices rose 0.3% in October, disappointing market expectations for a rise of 0.6% and dulling demand for the high-yielding kiwi.
  
• In addition, US core producer prices, those excluding food and energy, unexpectedly dropped by the most in three years, which supported a rise in the sterling/kiwi price.
  
• In trading this morning, the New Zealand dollar has recovered losses, bringing the price back below 2.24 as demand for the UK currency stumbles.

Demand for the aussie was subdued yesterday after the RBA struck a less hawkish tone than expected in their last meeting

The pound rose to a one-week high against the aussie, extending its gains as investors pared back bets that the RBA would raise their rates again this year.

• The Australian dollar suffered as investors scaled back speculation of an imminent rise in interest rates following the release of the minutes of the Reserve Bank of Australia's November meeting.
  
• The market had quickly priced in successive hikes after the RBA raised rates by 0.25% back in October, however, the minutes were less hawkish than many had expected, which gave investors the opportunity to cash profits, weakening the aussie.
  
• In addition, investor risk appetite did showe signs of fading yesterday as a rally in the US dollar helped pull equity markets back from 2009 highs and commodity prices flattened.
  
• In trading this morning, sterling has slipped closer to 1.80 as investors remain cautious of the UK currency ahead of important BoE policy information to be released at 09:30.

The euro was on the back foot in trading yesterday as investors bought back into the US dollar

The euro extended losses yesterday, dipping sharply to a two-week low of 1.4811 against the US dollar as investors turned more risk adverse.

• A subdued global equity market performance relieved some pressure on the dollar, although US stocks did moved slightly higher late in the New York session.
  
• Traders said the dollar's rise also reflected a delayed reaction to comments from Mr Bernanke, who said that the central bank was "attentive" to the implications of changes in the value of the dollar.
  
• Though the tone of his comments were not alarming, in just mentioning the currency it shows that the Fed is aware of market concerns and acknowledged the need to address the issue.
  
• ECB President Jean-Claude Trichet helped to extend the euro's losses following an interview with French newspaper Le Monde, in which he welcomed Bernanke's remarks and said the euro was never intended to be a reserve currency.
  
• The dollar took little notice from a mix of data showing lower inflation pressures from wholesalers, smaller gains in factory output and an improvement in foreign capital inflows to the US.

Waning risk appetite in the market enabled the dollar to pull back early losses against the pound

Having enjoyed a slight rally in early trading, demand for the pound eased enabling the US dollar to recover with the price closing the day little changed at 1.6810.

• Sterling edged back up towards a three-month high in European trading hours after a key reading of annual UK inflation accelerated for the first time in eight months in October .
  
• The pound nudged up to an intraday high of $1.6872, a shade below its highest point since August this year, after the annual consumer price inflation rate hit 1.5%, in line with economists' expectations.
  
• The figures fuelled the view that the Bank of England might be coming close to the end of its quantitative easing programme after announcing a £25bn extension to its assets purchase scheme at its policy meeting earlier this month.
  
• However, the US dollar recovered its losses as risk appetite wavered in the wake of subdued global equities. Analysts also noted that the dollar's gains were a result of a delayed reaction to rare comments on the depreciation of the US currency from Ben Bernanke.
  
• In trading this morning, the pound is marginally down as investors await the release of the minutes from the BoE's latest policy meeting at 09:30.

Strong UK inflation data and a weak single currency enabled the pound to push higher yesterday

The pound continued to climb against the single currency, pushing its two-month high up to 1.1319 in the wake of positive UK inflation data.

• Sterling opened the day on a positive note as investors digested the words of BoE policymaker Andrew Sentence, who said that Britain is returning to growth but risks stoking inflation if it keeps stimulus measures in place for too long.
  
• His comments supported claims that the last installment of £25billion to the asset purchase scheme would be the final expansion.
  
• Sterling extended its gains following positive UK inflation data, which came in higher-than-expected in October.
  
• UK consumer price inflation rose 0.2% in October, exceeding forecasts for a 0.1% rise. This took the annual rise in CPI to 1.5%, up from 1.1% in September.
  
• In the euro zone, data revealed a positive trade balance for September. The figure of 6.8 billion represents a significant improvement after August's disappointing deficit, and shows a clear resilience in the export market.
  
• However, the data had little impact on the euro, which suffered after ECB Trichet welcomed Bernanke's remarks on a strong dollar.

Sterling is up against the kiwi as rising risk appetite has little impact on a weaker NZ dollar

The pound crept up against the kiwi dollar in trading yesterday, though with little economic data to guide the market the pair held relatively steady.

• Rising risk appetite, spurred by better-than-expected US retail sales and robust Japanese growth figures, was unable to lift demand for the higher-yielding currency.
  
• Investors remain wary of the kiwi after the Reserve Bank of New Zealand made it clear that they plan to keep interest rates at a record low level well into 2010.
  
• In trading this morning the pound has rallied over a cent, bringing the price back over 2.25 with investors taking their lead from a weaker Australian dollar.

Following a slow day, the pound is currently trading strongly against the aussie following dovish comments from the RBA

There was little movement between this pair yesterday with the pound managing to make hesitant gains as investors remained cautious ahead of RBA monetary policy minutes.

• Rallying equities and the rising price of gold were unable to push the aussie higher in trading yesterday as market participants held steady before important policy information.
  
• Indeed, the price of gold hit another record high yesterday as the US dollar resumed its downward trend, which helped global equities to fresh highs for 2009.
  
• In trading this morning, the aussie has slipped backed after the central bank said it was keeping an open mind on the pace of further interest rate rises, forcing investors to cut bets of a December hike.
  
• Though the RBA were less hawkish than many had expected, calling future rate rises as "open question," the market is still pricing in 155 basis points of rate rises next year, hoisting the target rate to 5%.
  
• Currently the aussie has dropped back 1.0%, enabling the price to climb back over 1.81.

The single currency has once again found a ceiling at $1.50, currently trading slightly lower despite strong risk appetite

The single currency posted gains against a broadly weaker dollar yesterday, buoyed by a rally in risk appetite and the words of Ben Bernanke.

• The dollar weakened against most of its major counterparts as Japan's economy expanded in the third quarter at the fastest pace in more than two years, encouraging demand for higher-yielding assets.
  
• Japan's gross domestic product rose at an annual 4.8%, Cabinet Office figures showed yesterday. It was the second straight advance after the nation's deepest postwar recession.
  
• Strong US equities and data showing that retail sales rose more than economists predicted suggested improvement in the US economy and emboldened investors to move towards riskier assets and away from the relative safe-haven of the greenback.
  
• In the evening, the dollar pared its losses after Federal Reserve Chairman Ben Bernanke gave reassurances that the central bank is committed to a strong currency but failed to convince investors that the US would take action to shore up the greenback.
  
• In trading this morning, the dollar has made hesitant gains, buoyed by rising risk aversion due to sagging Asian stock markets, with Japan's Nikkei 225 closing down 0.6%.

The dollar has weakened against the pound following a speech from Fed Chariman Bernanke

Sterling shot up to a three month high of 1.6875 against the dollar yesterday after strong equities and comments from the Fed Chairman encouraged risk appetite.

• Asian and European stock markets started the week on a positive, and Wall Street joined the trend in the US, with the S&P 500 claiming another peak for the year, which weakened demand for the haven currency.
  
• Stronger-than-forecast US retail sales numbers for October added to the optimistic mood.
  
• U.S. retail sales increased a seasonally adjusted 1.4% in October, led by a rebound in auto sales from a post-clunkers slump .
  
• As the dollar weakened, investors were encouraged to add to bets in the carry trade, which added pressure to the ailing greenback.
  
• In addition, in the evening Fed Chairman Ben Bernanke mentioned the need for a strong dollar, which encouraged dollar selling.
  
• However, Bernanke did not promise any support for such a policy and in fact reiterated his stance on holding rates low for an extended period. In response the pound has capped its gains in trading this morning, with the pair trading steadily around the overnight closing price.

The pound is enjoying a strong rally at the moment, currently hovering just below 1.13

The pound climbed for the third consecutive day against the single currency, reaching up to a two month high of 1.1270 following the positive words of leading policy makers.

• During the early trading sessions, the pound found slight support as rallying equities firmed up demand for sterling, though the pair remained relatively range bound.
  
• On the US session, a speech from Ben Bernanke saw a sharp spike in demand for the pound as his comments on the need for a strong dollar strengthened confidence in the global economy.
  
• Sterling was able to hold its gains following comments from BoE policy maker Andrew Sentance who highlighted the risk of stoking inflation if the central bank keeps emergency stimulus measures in place for too long as Britain's economic recovery gains traction.
  
• For sterling, the focus remains on whether or not the Bank of England has finished asset purchases under its quantitative easing programme, with the minutes to its November meeting set to be released on Wednesday.
  
• The minutes will probably be the key event for the pound this week, given the high degree of uncertainty surrounding the voting pattern.

The kiwi made strong gains against the pound at the end of last week but has pared its gains this morning

Sterling slipped back nearly two cents against the kiwi dollar as risk appetite was upheld by strong US and Asian equities.

• Having traded sideways during the European session on Friday, the kiwi made gains as the US equity markets opened on a positive note, despite weaker than expected trade data, which spurred a modest return to risk appetite.
  
• In trading this morning the kiwi is slightly lower after data showed little inflationary pressure in the economy, supporting the central bank's view that rates will be on hold until the second half of 2010.
  
• The New Zealand producer price index fell more than expected in the third quarter, while activity in the services sector retreated for the first time in four months in October, reflecting a patchy recovery from the recession.

Higher equities and gold prices kept the aussie trading strongly on Friday

The pound was down 0.4% against the aussie dollar as stronger US equities maintained a level of risk appetite, which supported the higher-yield currency.

• In addition to stronger stocks, the aussie also found support from a continued rise in the price of gold as investors looked to diversify their trading portfolios in order to hedge against a weak US dollar.
  
• Gold climbed to an all-time high as investors stepped up purchases of the precious metal on speculation that the dollar will extend its decline.
  
• However, the world's top mining companies have warned today that global production of gold is likely to resume a long-term decline in coming years, which may prove a burden to the aussie in the future.
  
• In trading this morning, the pair are holding steady, with investors awaiting comments from Obama's visit to China where the valuation of the Chinese yuan is being discussed.
  
• Given the close trading relation between China and Australia, the strength of the yuan has strong influence on that of the aussie.

The euro traded higher than the dollar at the end of last week following positive EU growth data

The single currency was up half a cent against the dollar on Friday, recovering some of its mid-week losses as investors chose to take profits in the greenback.

• The dollar lost ground against most major counterparts on Friday for the first day in three, with strategists attributing the modest weakness to investors taking profits on the greenback's recent bounce.
  
• In the eurozone, data revealed that German GDP expanded 0.7% in the third quarter and French growth was at 0.3%. Although these figures fell short of market expectations, they confirmed continued economic expansion, which lent support to the euro.
  
• The greenback briefly extended losses after data showed that the US trade deficit widened more than forecast, to $36.5 billion in September, enforcing sentiment that rates would remain low for some time.
  
• The dollar also stayed lower as stocks held onto gains after the Reuters/University of Michigan index showed consumer sentiment unexpectedly declined in early November to its weakest level in three months.
  
• The single currency has continued to climb higher this morning, currently up half a percent to regain its positions just below $1.50.

Sterling posted gains against the dollar on Friday and is continuing to make ground this morning

The pound was a cent up against the dollar on Friday as market participants took profits on the greenback's modest bounce earlier in the week.

• The greenback extended losses after data showed that the US trade deficit widened more than forecast, to $36.5 billion in September, and that import prices rose 0.7% last month.
  
• Strategists noted that while trade is not usually a prime driver of currencies, the combination of rising imbalances and extremely low rates is typically a US dollar negative.
  
• The pound rose as a planned merger of British Airways Plc and Iberia Airlines sent the UK's stock market slightly higher and spurred speculation the economy is improving, boosting demand for the currency.
  
• However, sterling buying is commonly seen as market strategy when the price drops to $1.65 rather than speculative buying, as investors are keen to pick up sterling as it falls to cheaper levels.
  
• In trading this morning, the pound has pushed through resistance at $1.67, currently up over half a cent as rhetoric over China's yuan currency policy increased.
  
• Investors will be watching US retail sales data for October released at 13:30, which, if it follows forecasts, could boost risk appetite.

Sterling made its way back towards 1.12 on Friday but has edged down in trading this morning

Sterling enjoyed a slight rally at the end of last week, once again briefly stretching up over 1.12 against the single currency before closing at 1.1188, up 0.2% on the day.

• Sterling recovered some of its two-week losses against the euro on Friday as traders closed short positions in the UK currency ahead of the weekend.
  
• The single currency found itself on the back foot after data showed that the eurozone returned to growth in the third quarter, but at a slower pace than expected.
  
• The euro-zone economy registered quarter-over-quarter growth of 0.4%. The figure fell short of the 0.6% increase forecast by economists, largely due to a weaker-than-expected outcome turned in by both France and Germany, the region's two largest economies.
  
• The pound also found support as a planned merger between British Airways and the Spanish Iberia airline spurred speculation that the economy is improving.
  
• Analysts noted that the slight gain for sterling on Friday showed an unwinding of pessimism that followed the inflation report, although the currency would remain volatile because of the continued uncertainty on the British monetary policy.

Concern over the strength of the global recovery dulled demand for the kiwi yesterday

Sterling was up nearly two cents, or 0.9% against the kiwi, as risky-assets took a broad downturn with the pair closing up at 2.2613.

• A drop in European equities was mirrored by the major indices in the US and Asia, which also closed in the red, discouraging demand for higher-yielding kiwi.
  
• The New Zealand dollar also lost ground to the pound after Chinese Premier Wen Jiabao said the world economy faces a bumpy recovery, discouraging risk demand.
  
• "The world faces a gradual and uneven recovery from the worst financial crisis since the Great Depression," China's Wen said in a televised speech in Beijing.
  
• The kiwi is continuing to lose ground in trading this morning as investors turn to profit taking ahead of the weekend and as policymakers warn that economic recovery is still fragile.

The waning of risk appetite and slight profit taking enabled the pound to climb against the aussie

The pound reversed a run of losses yesterday, advancing 0.7% on the aussie, as demand for the riskier currency was dulled as risk appetite waned.

• The aussie retreated from two-week highs as the rally in global stocks markets stumbled slightly, reducing investors' willingness to take on risky trades.
  
• The loss of risk gave traders an opportunity to cash in on aussie strength and take profits ahead of the week, which enabled the pound to close the day up at 1.7944.
  
• Analysts noted that market participants were unwilling to take up positions in risky assets ahead of statements from policymakers in the build up to this weekend's APEC Summit and next week's US-China Summit.
  
• In trading this morning the pair are trading sideways, holding around the overnight closing price. However, analysts are expecting the aussie to remain strong over the longer term with high gold prices and a weak US dollar supporting demand for the Australian currency.

USD found support in trading yesterday from weaker stocks and bullish comments from a US policymaker

The single currency fell sharply against the dollar, losing well over a cent as investors retreated from risk activity on lower equities.

• The dollar held the line on gains against major counterparts, getting a boost as investors turned to safe-haven assets as stocks on Wall Street appeared unable to pass through key resistance levels.
  
• The dollar advance was also bolstered by a report showing initial US weekly jobless claims were lower than expected.
  
• US initial jobless claims decreased to 502,000 in the week ended Nov. 7, from a revised 514,000 in the previous week, the Labor Department reported.
  
• One analyst also cited the dollar's strength as a result of the position-driven market. People went short on the dollar on Wednesday, and after stops losses were triggered around 1.50, traders bought it back after.
  
• In addition, the dollar was supported after US Treasury Secretary Timothy Geithner said the government's borrowing needs in the future would be substantially less than expected.

Stumbling equties enabled the dollar to make hesitant gains yesterday

The pound edged down against the US dollar as weaker equities slowed demand for risk appetite.

• In early trading, sterling fell to a one-week low against the dollar as investors absorbed Bank of England chief Mervyn King's comments from Wednesday that left the door open to more asset purchases to keep monetary policy loose.
  
• The inability of the Dow Jones Industrial Average to break through resistance at the 10,300 level provided the dollar with some modest relief, but analysts cautioned that a "much weaker Dow" would be needed for there to be a significant dollar rebound.
  
• The US Labor Department also reported yesterday that initial state jobless benefit claims fell to 502,000 in the latest week from a revised 514,000 in the prior week. The consensus forecast was for initial claims of 510,000.
  
• In addition, the dollar found slight support after Timothy Geithner, US Secretary of Treasury said that "we are likely to have to borrow substantially less than we initially anticipated to help repair the damage to our financial system."
  
• Investors are now shifting their focus to a meeting of Asia-Pacific nations and other Asian regional issues, including a U.S. state visit to China next week.

The pound recovered in trading yesterday and has continued to post gains against the euro this morning

The pound rallied strongly against a broadly weaker euro yesterday, recouping losses incurred on Tuesday to close the day back up at 1.1166.

• The euro came under slight pressure after data that showed industrial production in the 16-nation euro zone rose 0.3% in September. Compared to the same month last year, output was down 12.9%.
  
• The euro also suffered heavily against the US dollar and traders cited that heavy sell off as cause for the single-currency's weakness against the pound.
  
• Analysts noted that overall action in currency markets remained largely driven by technical considerations yesterday amid a lack of major economic data to drive foreign-exchange trading.
  
• In trading this morning, the euro has come under further pressure, after both the Germany and French economies undershot their growth forecasts for the third quarter.
  
• It has been revealed that in the three months through September, German GDP was 0.7%, marginally below the 0.8% prediction. Meanwhile, French GDP for the same period was at 0.3%, some way below the 0.6% forecast.
  
• The pair are currently hovering just above 1.12

Sterling lost further ground to the kiwi yesterday in the wake of the BoE inflation report

Sterling fell another 0.5% against the kiwi dollar as confidence in the UK economy was undermined by the BoE and Mervyn King.

• "The depreciation of sterling should lead to a recovery in economic activity," King said after the bank's quarterly report was published. "The outlook for inflation is again highly uncertain."
  
• Given more recent positive economic fundamentals in the UK, the market had anticipated a relatively upbeat report. However the dovish tone saw investors sell off the pound sharply after the report was released, taking it down to near two-week low against the kiwi.
  
• The kiwi has continued to gain in trading this morning, finding support from firmer Asian equities.
  
• Overnight, retail sales data was released in New Zealand, which actually disappointed market expectations. Sales rose by 0.2% in October, falling short of forecasts for a monthly rise of 0.5%
  
• However, the kiwi remains steady on the day,as yesterday's inflation report continues to weigh on the pound.

The aussie is climbing strongly against the pound, supported by risk appetite and positive employment figures

The aussie continued its climb against the pound yesterday, advancing for the fourth straight day, as the positive data from China encouraged risk appetite.

• Investor sentiment was boosted by Chinese data that showed the country's economy continued to recover. Industrial output in China, Australia's closest trading partner, rose by a better-than-forecast 16.1% in October, which heightened investors' appetite for risk.
  
• Analysts said the news had lifted risk appetite, encouraging carry trade investors to sell the low-yielding dollar to fund the purchase of riskier, higher-yielding assets.
  
• In the UK, the BoE's inflation report disappointed investors, focusing on the uncertainties surrounding growth and reiterating that the Bank is not yet ready to say to the market that it has finished with quantitative easing .
  
• In trading this morning, the aussie has found further support after stronger-than-expected Australian employment data for October, fuelled bets for another interest rate rise this year.
  
• Data showed that 24,500 jobs were actually created in October, confounding forecasts of for a loss of 10,000. It adds to mounting evidence that Australia is at the forefront of economic recovery and currently the aussie dollar is a further cent up against the pound.

Having reached a high above 1.50 on positive data, the euro slipped back as investors trimmed their long positions

The single currency reached a near 15-month high yesterday, but could not consolidate its position above 1.50 and retreated to close the day marginally down at 1.4980.

• The US dollar broadly sank versus most rivals yesterday, facing pressure as traders showed renewed appetite for risky assets and a "carry-trade" strategy centered on selling the greenback.
  
• Equity markets resumed their upward climb as investors showed renewed appetite for risky assets, which supported a move away from the greenback.
  
• In addition, further dovish comments from Federal Reserve officials also encouraged dollar selling, reinforcing the view that US interest rates would remain at ultra low-levels for the foreseeable future, strengthening demand for the euro
  
• Richard Fisher, the president of the Dallas Fed, who had been one of the most hawkish members of the central bank's policy committee, said he saw "more immediately deflationary concerns than inflationary ones."
  
• However, in the later session, the euro was unable to sustain such strong levels, steadily retreating back below 1.50 as traders cautioned over going too long ahead of 3 rd quarter GDP figures released in Germany and France on Friday.

Positive UK unemployment data was unable to buoy the pound in the wake of comments from Meryvn King

The pound tumbled to an intra-week low against the dollar yesterday after the BoE said recent weakness in sterling would continue to aid an export-led rebound.

• In early trading, the UK currency made hesitant gains after the Office for National Statistics said claims for jobless benefits rose by 12,900 in October, the slowest rate since April 2008 and far less that the official estimate .
  
• However, not too shortly after, the central bank's quarterly inflation report and Mervyn King's accompanying statement dampened the recent build up in confidence in the UK economy.
  
• The report did boost its forecast for growth and inflation, but continued to point toward maintaining low official interest rates well into 2010.
  
• The inflation projection showed a significant undershoot of the 2% target, which weighed on the pound. In addition the door for more quantitative easing was left far more ajar than people had anticipated.
  
• In this morning's session the pair is trading steadily around 1.6550, slightly below the overnight closing price. There is no data out in the UK today, though positive unemployment claims figures in the US, released at 13:30, may weaken demand for the haven currency.

The BoE's inflation report has put sterling under selling pressure, now back below 1.11 against the euro

The pound suffered in trading yesterday, losing over a cent (1.0%) to the euro after the Bank of England's November Quarterly Inflation Report struck a more dovish tone than expected.

• Bank of England Governor Mervyn King in a press conference reiterated an earlier opinion that a weaker currency should lend support to the recovery, putting pressure on sterling.
  
• King continued, stating that UK economy has "only just started" along its road to economic recovery, and told reporters that the central bank is keeping an open mind over the prospect of further boosting its quantitative-easing programme.
  
• Analysts said this reinforced the view that UK interest rates would remain at low levels for an extended period weakening demand the pound.
  
• The comments reversed slight gains made in early trading in the wake of positive employment figures. It was revealed that the overall UK jobless rate held steady at 7.8%, beating market expectations of a rise to 8.0%.
  
• In addition, the number of new people claiming employment benefit fell to 12.9K in October, a considerably improved figure from the 20.8K the previous month.

The pound was down against the kiwi yesterday but has picked up today after the RBNZ expressed renewed concern over the strength of the currency

The UK currency edged down against the kiwi in trading yesterday, losing just 0.1%, as weak global equities offset a poor report on the UK's credit rating.

• Sterling lost ground on Tuesday after a ratings agency said the UK was the major economy most at risk of losing its AAA credit rating.
  
• However, after a knee-jerk sell-off in response to the comments, the pound recovered some poise after traders realised that the remarks contained no new information.
  
• The kiwi was also struggled as risk appetite waned slightly with global equities failing to build on Monday's gains, which dampened demand for the higher-yield currency.
  
• This morning, the pound has recovered its losses after the Reserve Bank of New Zealand said the current high level of the kiwi dollar was not sustainable and might hinder the rebalancing of the economy after the financial crisis.

Pound continued to slip back against the aussie, hampered by a report from Fitch ratings agency

The pound continued to lose ground to the aussie dollar yesterday, dipping back below 1.80 as Fitch rating agency commented on the fragility of the UK's AAA credit rating.

• Sterling slipped back sharply as Fitch released the news in the early hours yesterday morning, with investors concerned about the long term health of the UK economy.
  
• However, sterling pulled back steadily from its sell off following a survey from the UK's Royal Institution of Chartered Surveyors, which said its measure of house prices rose to +34, its highest in nearly three years.
  
• In addition, the British Retail Consortium said the value of like-for-like UK sales rose 3.8% in October compared with a year ago, the biggest rise since April.
  
• In trading this morning, the aussie has made further ground on the pound, although its gains are limited as a raft of data from Australia's top trading partner, China, did not excite investors as it showed a marked slowdown in loan growth and sluggish trade performance.

A fall in confidence in Germany, put the euro under pressure yesterday, edging down against the dollar

The dollar stabilised after heavy selling on Monday as weak data from the eurozone put pressure on the single currency, with the pair closing slightly down at 1.4991.

• The dollar found support as global equities turned negative, failing to build on gains at the start of the week, which dulled demand for the "riskier" euro.
  
• The single currency was also undermined by a report that showed German investor confidence declined once again in November, by more than economists estimated.
  
• The ZEW Centre for European Economic Research said its index of investor and analyst expectations in Germany, which aims to predict developments six months ahead, dropped to 51.1 from 56 in October.
  
• Having lost significant ground in early trading, the euro recovered steadily through the afternoon session as risk appetite returned to the markets and investors resumed dollar selling.
  
• However, analysts did note that concerns continued to be voiced about the strength of the euro, with one EU official stating that its current valuation is not good news for growth in Europe."
  
• Currently, the single currency is trading slightly higher as European stocks open on a positive note, with the price holding above 1.50.

Sterling stumbled yesterday after a damning credit rating report weakened confidence in the UK economy

The pound dropped for the first time in six days against the greenback, though its losses were minimized with dollar selling remaining the overall market trend.

• Initially sterling fell sharply, losing over a cent, after a ratings agency said highly-indebted Britain was the major economy most at risk of losing its triple-A rating.
  
• The pound retreated from a three-month high against the dollar after Fitch told Reuters Britain would have a tougher time than the United States in sustaining its fiscal deficit without impacting interest rates or the currency.
  
• However, sterling was able to trim its losses as strong data on UK house prices and retail sales released overnight suggested the economy was showing positive signs of emerging from recession.
  
• Furthermore, analysts felt that the pound had fallen in a knee-jerk reaction to Fitch's statement and that traders pared back their sterling short positions as they realised there was nothing new in the news.
  
• In trading this morning, the pair is steady, currently hovering around 1.6750, as investors await important UK employment figures and the BoE's quarterly inflation report.

The pound lost ground to the euro yesterday but recovered to close just 0.04% down

Sterling came under heavy selling pressure after the UK's credit rating came under fire, but the pound recovered to finish just marginally down against the euro.

• In early trading, the single currency advanced against the pound as European stocks rebounded and Fitch Ratings said the UK's credit rating is most at risk among top-rated nations.
  
• The pound dropped against all but one of the 16 major currencies after David Riley, head of global sovereign ratings at Fitch, said the UK needs "the largest budget adjustment."
  
• Data also revealed that the UK trade deficit widened sharply to an eight-month high in September as imports of cars surged to their highest level for more than a year.
  
• The Office for National Statistics reported the UK's global goods trade deficit widened to £7.2 billion in September from a deficit of £6.1 billion in August.
  
• However, sterling was able to recover, recouping losses on the view that the comments from Fitch added little to what was already known.
  
• In addition, the German ZEW Economic sentiment survey revealed a further drop in confidence, which dampened demand for the euro.
  
• Investors today look ahead to the Bank of England's quarterly Inflation Report at 10:30, when the central bank will set out its latest forecasts for growth and prices.

The pound lost ground yesterday as demand for the kiwi soured on positive data and rising risk appetite

Sterling slid over three cents, or 1.5%, against the kiwi yesterday with improved risk appetite favouring higher-yielding currencies.

• Data released in New Zealand showed house prices in the country rose for the first time in 16 months, adding support to the kiwi dollar.
  
• In addition, growing optimism about the state of the Chinese economy, with a raft of economic data being released on Wednesday morning, supported demand for commodity-linked currencies such as the kiwi.
  
• Investors are pricing in positive economic figures from China tomorrow, underscoring the strength of the global recovery and supporting demand for higher-risk assets.
  
• In trading so far today, the pound has resumed its slide against the New Zealand currency after news Britain's AAA sovereign credit rating may be under threat.

The pound has fallen against the aussie, undermined by a comment from Fitch Ratings agency

The pound fell half a cent against the aussie yesterday, as improved investor sentiment buoyed riskier currencies.

• The aussie found support as commodity-linked currencies were lifted by increasing investor confidence about the global economic recovery.
  
• Leading global equity markets rallied by over 2%, which buoyed risk appetite lifting the Australian dollar.
  
• In addition, high-risk currencies were supported as the IMF named the US dollar the currency of choice for funding the carry trade.
  
• In trading this morning, the pound has fallen further after ratings agency Fitch said the UK's sovereign credit rating is most at risk among top-rated nations.

The dollar stumbled in trading yesterday with investors buying into riskier assets as equities rallied

The single currency rose sharply against the dollar yesterday, gaining over one and a half cents in the wake of positive German data to close marginally below 1.50.

• Demand for the safe-haven US currency was muted as equity markets rallied strongly, with analysts noting that investor optimism continued to be supported by last week's pledge from the Federal Reserve to keep interest rates at ultra-low levels for an extended period.
  
• In addition, the failure of the G20 leaders to discuss currencies in their meeting over the weekend implied a continued comfort among authorities with the dollar's recent depreciation.
  
• The euro was able to once again breach the $1.50 level for the first time in two weeks, after figures showed a larger than expected 2.7% rise in German industrial, exceeding market forecasts of a 1.2%.
  
• Data also revealed stronger exports in Germany, which undermined calls that current euro value is burdening economic recovery.
  
• The greenback has pared losses in trading this morning as short-term players move to close out accumulated short positions on the dollar as they prepare for a public holiday in the US.

The pound posted strong gains against the dollar yesterday as risk appetite surged

Sterling traded strongly against a broadly weaker dollar, achieving a three-month high of 1.6842 as investors were given a green light to sell the greenback.

• Rising risk appetite weighed on haven demand for the US currency as global equity markets rallied in the region of 2%, with the Dow Jones reaching its highest point this year.
  
• The dollar also came under pressure in the wake of the G20 meeting held over the weekend. The statement boosted risk appetite by saying it was too early to exit from current economic stimulus policies but made no mention of exchange rates.
  
• Furthermore, a report from the International Monetary Fund also weighed on the dollar as it named the US unit as a currency of choice for funding carry trades, in which low-yielding currencies are sold to fund the purchase of riskier, higher-yielding assets elsewhere.
  
• The pound has reversed gains in trading this morning after Fitch Ratings said the UK is at the most risk of losing its AAA status among major economies.
  
• The UK currency lost over a cent as the news was released, but is consolidating its position over 1.66 with overall sentiment toward the dollar remaining bearish.

After a strong start, the pound lost ground to the euro yesterday in the wake of strong German data

The pound reached a near two-month high in early trading yesterday, but the euro eroded losses following positive data, with the pair closing marginally down at 1.1171.

• The euro found support yesterday after government data showed German industrial output rose more than economists had forecast as factories expanded production to meet export demand.
  
• Figures showed a larger than expected 2.7% rise in German industrial production, exceeding market forecasts of a 1.2%.
  
• In addition, data revealed that German exports jumped by 3.8% in September, which underscores Germany's ability to export even in a strong euro environment and undermines the view of some eurozone finance ministers that euro strength is impeding the ability to export.
  
• Sterling has come under selling pressure this morning after Fitch Ratings agency said that the UK rating faces risks of losing its AAA status because the country needs "the largest budget adjustment." The pound is currently trading half a percent down, hovering just above 1.11.
  
• Investors are awaiting an economic sentiment survey from Germany, released at 10:00, which is forecast to show a further fall this month and could put pressure on the single currency.

Sterling is trading strongly against the kiwi, boosted by positive economic data in the UK

Sterling edged higher against the kiwi in trading yesterday, supported by solid data from the services sector to close the day up at 2.2834.

• The pound made marginal gains after a survey of purchasing managers indicated the UK's dominant services sector saw activity rise at its fastest pace in more than two years.
  
• The data, which exceeded market expectations, followed on from positive manufacturing data earlier in the week and reaffirmed hopes that the UK economic recovery is not stalling.
  
• In trading this morning, the pound has backed off slightly in anticipation of the BoE's interest rate decision, which analysts are suggesting is likely to cause volatility if the members disagree over the level of quantitative easing that is necessary.
  
• In addition, the New Zealand currency has benefited from the US interest rate statement last night, which confirmed that US rates would be low for some time, encouraging investors to continue using the carry trade to invest in higher-yield currencies.
  
• Currently the pound is climbing higher, hovering just below 2.2300 against the kiwi, as positive manufacturing data boosts demand for the UK currency.

Aussie edged higher against the pound, supported by a rise in commodity prices

Trading between this pair was relatively subdued yesterday with the aussie dollar creeping ahead by the close of play, helped by a jump in the price of gold.

• Support for the aussie remained dulled as investors continued to be discouraged following weaker than expected retail sales data.
  
• Although sales were improved from September, the data still revealed a month on month decline in overall sales value, some way below the anticipated 0.5% increase.
  
• However, the Australian currency did find support from solid equity and commodity prices, with gold in particular rising to just shy of $1100 per ounce after India's central bank bought 200 metric tons of the precious metal from the International Monetary Fund.
  
• Analysts noted that risk on is still the general theme running through foreign exchange markets, which is buoying the aussie, however moves are relatively small ahead of two days filled with data and event risk.
  
• The pound is trading slightly higher this morning in the wake of slightly lower gold and stock prices, although the continued prospect of a higher-yield in the aussie is maintaining its strength.

Euro rallied against the US dollar as the Fed confirmed their stance on a loose monetary policy

The single currency rallied from recent lows against the dollar gaining 0.9% as the stock markets firmed and investors got reassurance of low rates from the US Fed.

• European equity markets reversed their recent downward trend yesterday lending support to the euro as the market sold dollars in favour of riskier assets.
  
• Weaker-than-expected predicted unemployment figures went relatively unnoticed in the markets, but the dollar did extend losses following data from the US ISM services sector, which expanded for the second consecutive month, eroding the greenback's safe haven appeal.
  
• In the evening session, the euro jumped to a fresh intra-day high of 1.4905 as the Federal Reserve confirmed market expectations in making no change to their current stance on interest rate policy, calming any fears.
  
• In trading today, the European Central Bank hold their policy meeting, where analysts are keeping a close eye on any mention of exit strategies.

Dollar was weaker in trading yesterday, as strong equities boosted risk appetite

The pound climbed near a cent and a half, or 0.8%, against the US dollar, buoyed by positive UK services data and the Fed's confirmation to keep rates low.

• Sterling found support against a weaker dollar after a UK index of service industries, like its manufacturing equivalent released on Monday, rose in October to the highest level since the onset of the credit squeeze in August 2007.
  
• The October figure came in at 56.9 versus 55.3 in September and a consensus forecast of 55.5. New orders also improved, suggesting that economic growth was gaining momentum.
  
• The pound was able to extend gains in the evening after the Federal Reserve left rates unchanged and reaffirmed its commitment to keep borrowing cost low for "an extended period."
  
• The decision calmed fears among investors that the Fed may signal a tightening of policy following a positive GDP figure, and led to broad selling of the dollar.
  
• In trading today, investors await the BoE announcement on quantitative easing. Some analysts note the outcome may see a split vote, with some of the more hawkish members voting for no extension, which may heighten sterling volatility.

Sterling found support from strong services PMI data yestreday, but lost ground to the euro in the later session

Having posted solid gains throughout the morning and afternoon sessions, briefly reaching over 1.12, the pound slipped back, enabling the euro to close marginally up on the day.

• Sterling initially rose after data showed a higher-than-expected increase in UK service sector activity and as a rebound in equity markets eased risk aversion.
  
• The services PMI index rose to 56.9 in September, its highest level since August 2007, beating market expectations of a rise to 55.4, and the sixth successive month above the 50-level, which represents industry expansion.
  
• However, the euro recovered its losses in the wake of a strong rally against the US dollar, which came under heavy selling pressure following the Fed's rate statement.
  
• In trading today, investors are eagerly awaiting the announcement from the BoE, with market consensus being that they will top-up the quantitative easing programme by at least £25 billion after the economy unexpectedly contracted between July and September.
  
• However, recent positive manufacturing and services data is likely to harden the attitude of those members of the MPC who are opposed to an extension.
  
• The ECB rate decision is also due today, at 12:45. Markets are widely expecting rates to be held at 1.00%.

Positive US data supported a late rally in the kiwi yesterday after it fell sharply on falling equities

The kiwi dollar erased early losses yesterday as positive further positive data in the US attracted investors to the higher-risk currency.

• In early trading the pound gained steadily, benefiting from a hefty loss in global shares, which encouraged investors to trim their exposure to risk.
  
• Investors retreated from risk assets as European share prices fell 2% in the wake of renewed concerns over the banking sector.
  
• In the afternoon session though, data revealed that US Factory orders increased 0.9% in September, following an unrevised 0.8 decline in August, the fifth increase in the last six months.
  
• The data added to a string of positive economic figures that have come out of the US recently and boosted confidence over the strength of the global recovery, lending support to the New Zealand currency.
  
• In trading this morning, the kiwi is trading marginally higher with the price currently hovering just below 2.28.

Apprehensive words from the RBA kept the aussie on the back foot in trading yesterday

The pound climbed back over 1.82 against the aussie after a statement from the RBA dulled the possibility of a rate rise in December.

• In their rate statement early Tuesday morning, the Reserve Bank of Australia, though they did raise the base rate to 3.50%, sounded a more dovish tone than many expected.
  
• In response investors pared back expectations of a further rate rise next month after Glenn Stevens, RBA governor, said higher rates would come "gradually" and that the rise in the Australian dollar, which has gained 27% against the dollar so far this year, might hurt exports and economic growth.
  
• In addition, the announcement of the UK banking shake-up added to the negative sentiment towards the pound, underscoring the potential problems ahead for the economy and its troubled financial sector.
  
• In trading this morning, the pound is marginally down although an unexpected fall in Australia's September retail sales has added to doubts about a further near-term rate rise, slowing the aussie's gains.

The dollar pushed higher against the euro as weaker stocks raised risk aversion in the market

The dollar rose to a one-month high against the euro yesterday as a sell-off in global equities drove haven demand for the US currency.

• The dollar climbed strongly as stocks fell on evidence that banks are struggling to shake off the effects of the financial crisis, damping higher-yield demand.
  
• The single currency declined sharply from a session high of 1.4810 on Asian trade moving to a fresh one -month low at 1.4645, as stock markets plunged following weak results from UBS and news that RBS and Lloyds will undergo a severe shake up.
  
• The single currency came under further pressure in the wake of a rather gloomy economic outlook from the European Commission.
  
• The organisation stated that the EU economy will recover gradually over the next two years as unemployment and government budget deficits continue to climb. The commission expects the bloc's economy to contract by 4.1% this year before expanding 0.7% next year.
  
• The report continued, stating that EU unemployment will likely reach 10.9% in 2010 and warned about a "highly uncertain" economic outlook in the region, which weighed on euro strength.

Having made broad gains, the dollar slipped back on more positive US data

Sterling pulled back over a cent and a half from a two-week low of $1.6264 hit against the dollar yesterday morning, to close the day marginally up at $1.6427.

• Initially, the pound fell sharply after the UK Treasury announced a shake-up of British banks and as investors braced for a possible extension of asset purchases by the Bank of England this week.
  
• Britain's two largest retail lenders, the part-nationalised Royal Bank of Scotland and Lloyds Banking Group will between them sell off businesses equating to 10% of the UK retail banking market to appease EU competition concerns.
  
• The shake-up highlighted the fragility of the financial sector, which is a key part of the UK economy, and added to concerns about the country's public finances.
  
• However, the pound staged a slight rally in the later session as data revealed that US factory orders increased by 0.9% in September, the fifth increase in the last six months, which supported rising optimism for the US economic recovery.
  
• Analysts also suspect that traders decided to sell out of the dollar rally in the later session with investors now eyeing the Federal Reserve's interest rate statement at 19:00 this evening.

The pound is trading well against a weak single currency undermined by EU reports

Sterling posted solid gains against a broadly weaker single currency yesterday, rallying to a close of 1.1155 as the EU commission voiced concern over the eurozone economy.

• The pound erased Monday's losses against the euro as demand for the single currency waned in the wake of an EU report that spoke of a "highly uncertain" recovery in the eurozone.
  
• Fears over the banking sector within the 16-nation bloc also brought the single currency under pressure, with the EU Commission estimating huge potential bank losses in 2010.
  
• In addition, European stocks fell sharply in the wake of news that UBS, the Swiss bank, reported a greater than expected loss. In the UK, RBS announced it was taking more public funding and Lloyds Banking Group announced a rights issue.
  
• In the afternoon, data revealed that UK house prices rose by another 1.2% in October, according to the Halifax, which is the fourth monthly increase in a row .
  
• Nationally, house prices have risen by 2.9% since the end of 2008 and they are now 7.1% higher than six months ago when prices reached a trough in April, which buoyed demand for the UK currency.

Kiwi enjoys steady gains as risk makes a slight return

The pound slid back over half a cent against the kiwi yesterday as investors showed slightly more appetite for risk assets in the wake of positive US data.

• A raft of positive data in the manufacturing, construction, and housing sector’s yesterday raised confidence over the health of the global economy, benefiting higher-yield currencies.
  
• The kiwi also found support after the country’s Treasury said it expected the economy to grow at an annualised rate of about 2% in the second half of the year.
  
• Conversely the pound slipped back in trading, undermined by market speculation that the Bank of England would agree to extend their quantitative easing programme on Thursday.
  
• Data released yesterday morning revealed that growth in the UK’s manufacturing sector is accelerating, but the market appeared to shrug off the positive data, suggesting that investors are unlikely to take up sterling positions ahead of the BoE meeting later this week.
  
• The kiwi is continuing to trade strongly this morning, up a further 0.3% on sterling, bringing the price back below 2.28.

The aussie rally surges to a halt as the RBA caution against further rate increases in the short term

The aussie climbed over a cent, or 0.8%, against the pound in trading yesterday as the market priced in an interest rate increase in Australia.

• The aussie led a strong rally as investors positioned themselves for the rate decision from the Reserve Bank of Australia, with most anticipating a increase of 25 basis points.
  
• Although there were few still expecting the RBA to raise rates by 50 basis points following benign inflation data last week, investors were encouraged after, the Australian government on Monday upgraded its economic outlook, forecasting 1.5% annualised growth by the end of June 2010.
  
• Overnight the RBA did raise their rates by 0.25%, with the current interest rate now reading 3.50%, however the aussie has actually backed off following the news as the accompanying statement was not as hawkish as some had expected.
  
• With a rise already priced in, the aussie had little more to gain following the decision, but although it has dipped slightly, down 0.2% against the pound this morning, analysts note that with more rate increases to come the currency should remain well supported.

A brief return to risk appetite enabled the euro to post gains against the US dollar

The single currency gained half a cent on the dollar in trading yesterday as positive US data weakened demand for the haven currency.

• In early trading, a report showing China's manufacturing accelerated at its fastest pace in 18 months in October weighed heavily on the dollar as the positive news encouraged investor to buy into higher-risk currencies.
  
• The greenback lost further ground after the Institute for Supply Management's index of business activity rose much more than anticipated in October.
  
• US Manufacturing ISM rose to 55.7 in October, from 52.6 in September, well above the 53.3 reading expected by market analysts. Furthermore, pending home sales increased at a 6.1% pace in October
  
• This data, along with reports showing rising construction spending, helped stocks extend gains as investors increased their risk tolerance, detracting from the dollar's safe-haven appeal.
  
• The pair are trading steadily in this morning’s session, holding around the overnight closing price of 1.4765 as investors caution against taking positions ahead of central bank meetings in the US and EU.

Positive economic data in the US failed to buoy demand for the broadly weaker sterling

Positive UK manufacturing data was unable to offset bearish sentiment toward the pound yesterday with the US dollar closing 0.3% up.

• Sterling opened under heavy pressure yesterday as the markets speculated that the BoE would decide to inject further monetary stimulus into the economy at their next meeting.
  
• The pound was able to trim early losses though after a stronger-than-expected reading of UK manufacturing activity showed the sector expanded after prolonged weakness.
  
• The PMI index rose to 53.7 in October from an upwardly revised 49.9 in September, signalling the fastest pace of growth since November 2007 and beating forecasts for a rise to 50.1.
  
• In the afternoon, the pound recovered further ground as a raft of US economic data on manufacturing, construction, and housing showed more evidence of a recovery in the world's largest economy, encouraging investors to buy riskier assets.
  
• However, despite positive data, the pound was unable to make gains, still closing nearly half a cent down on the day as investors clearly remain cautious ahead of important central bank meetings this week.

Sterling under selling pressure as the market prices in an increase to QE

Sterling slipped yesterday, snapping a 5-day consecutive climb against the euro as traders braced for the possibility that the BoE may announce an extension to quantitative easing.

• The pound was broadly sold in trading throughout the day in spite of data showing that recovery in Britain's manufacturing sector was accelerating.
  
• The Chartered Institute of Purchasing and Supply said its composite index of manufacturing activity rose to 53.7 in October, following two-consecutive months of declines
  
• Investors appeared unconvinced, however. Improvements in purchasing managers' indices between March and July had prompted many to think the UK economy would have returned to growth in the third quarter, only to be disappointed by last month's negative GDP reading.
  
• The markets were particularly bearish towards sterling as they speculated that the BoE will announce a continuation of their asset purchasing scheme at their meeting later this week, which enabled the single currency to gain.
  
• Sterling was also under pressure from the looming announcement of a banking sector shake-up as the government finalises plans to carve up rescued banks RBS and Lloyds.

The kiwi retreated at the end of last week on a rise in risk aversion

The kiwi dollar struggled on Friday enabling the pound to jump 1.4%, briefly nearing the 2.30 level, as risk appetite in the market waned.

• Higher-risk currencies struggled to make headway at the end of last week as the rally in global equities in the wake of the positive US GDP data came to an abrupt halt.
  
• As global stocks fell, investors sought shelter in the haven currencies fuelling a sell-off in the higher-yielding kiwi dollar, buoying the sterling price.
  
• In trading this morning, the New Zealand dollar has pulled back from six-week lows against the pound, with profit taking in high-yield currencies taking a pause.
  
• Support has also come from improved manufacturing data in China, a key importer of New Zealand goods, which has outweighed some of the negative sentiment toward the currency.
  
• Analysts have noted though that reduced support for a rise in interest rates and lower risk appetite may prevent the kiwi from regaining its strong valuation.

Having weakened off sharply on Friday, the aussie is trading strongly against the pound this morning

The pound climbed just over two cents against a broadly weakened aussie dollar on Friday with a rise in risk aversion putting selling pressure on the higher-yielding currency.

• Weak data in the US and plummeting global equity markets enable the pound to gain as investors took the opportunity to cash profits in the aussie and retreat to safer assets.
  
• Analysts have recently noted that the rally in risky assets could come to an end. Conditions for perceived riskier assets to gain requires a flow of positive economic data combined with loose global monetary policies and low interest rates.
  
• The strong US GDP figure supported the rally in higher-yield currencies, but as the economic recovery shifts the balance in favour of tightening policy, it will likely signal the end of the rally in risky assets.
  
• However, the aussie is trading strongly again this morning, currently up over a percent, as investors bet that the Reserve Bank of Australia will raise interest rates at their meeting on Tuesday.
  
• Traders also said that Chinese data showing manufacturing activity at an 18-month high helped to mitigate some of the recent loss in risk appetite, bolstering aussie demand.

The euro lost ground to the dollar on Friday as the rally in equities came to a halt

The dollar strengthened, consolidating after broad selling on the back of data showing strong US growth, gaining over a cent on the single currency.

• Equities took a sharp downturn at the end of last week, having rallied after the positive US GDP data, most likely as a result of end of month profit taking, which buoyed demand for the greenback.
  
• Data also showed that US consumer spending fell for the first time in five months in September, coinciding with the end of the government's car scrappage scheme.
  
• The US Commerce Department says spending dropped 0.5% in September, compared with a 1.4% rise in August, which encouraged investors to buy back into the haven currency.
  
• The US dollar extended gains in the afternoon, pushing the euro down near three-week lows after data showed that a US Midwest manufacturing index was stronger-than-expected failed to heighten risk appetite.
  
• The euro has climbed in trading this morning with the price currently hovering around the mid 1.47 mark.

Dollar was buoyed at the end of last week as risk appetite waned

The greeback pulled back from its sharp sell-off on Thursday, as weak US economic data spurred a return to risk aversion.

• In early trading, the dollar continued to lose ground following the better-than-expected US growth data, however the GBP/USD rally was capped at 1.6600, and the UK currency pulled down steadily, eventually closing down 0.6% ay 1.6448.
  
• US markets went through losses on Friday, with financials and materials leading the path, as risk aversion returned after Thursday's optimism, strengthening support for the greenback.
  
• On the macroeconomic front, data revealed that US consumer spending declined 0.5% in September, the largest decline since December 2008, further buoying the dollar rally.
  
• Positive manufacturing data from the Midwest in the afternoon failed to dent dollar buying in the markets and traders acknowledged that part of this may have been due to month-end flows into the US currency related to foreign portfolios.
  
• The US currency has continued to climb in trading this morning, currently half a percent up, as investors remain cautious ahead of big events this week, including interest rate decisions in the UK, eurozone and US.

Pound edged up slightly against the euro on Friday but is down around 0.7% in trading this morning

The pound edged higher, achieving its biggest weekly advance against the euro since January, as signs pointed to the UK economic recovery talking hold.

• The pound/euro pairing was little changed at the end of last week, though sterling did creep up, supported by reports showing gains in consumer confidence and UK house prices.
  
• Month-on-month property prices were up for the sixth consecutive month in October and were 2% higher than in the same month the previous year. However, the pace of monthly price rises has eased, going up by just 0.4%.
  
• Meanwhile in the eurozone, data revealed that the unemployment rate rose to 9.7%, in line with market expectations, which raised concerns that recovery could still be destabilised, dulling demand for the euro.
  
• Last week the Bank of England completed its £175 billion asset purchase programme and so investors are now looking toward an extension of QE in their meeting this week.
  
• Analysts have noted that until the market is confident the BOE is done with quantitative easing, it is going to be very difficult for sterling to rally significantly from current levels.