Sterling enjoys successful day against the euro

The pound enjoyed a successful day against the single currency yesterday, breaching the 1.1300 level for the first time since the beginning of March as investors’ confidence in sterling continued. Sterling was boosted early in trading as the RICS revealed that UK housing market sentiment improved last month, recovering to its strongest level in 13 months during March. The FTSE 100 continued to simmer below the psychological barrier of 4000, as stock markets were a little quiet ahead of the major announcements coming out of the US this week.

The single currency also came under selling pressure after European Central Bank Governing Council member Axel Weber said a package of non-standard measures was set to be unveiled at next month’s policy meeting that will stretch into next year. The European Central Bank is increasingly being viewed as being behind the curve in regards to its monetary policy, with interest rates set to fall further and a foray into quantitative easing on the cards.

There are no first tier economic announcements due in the UK today, with the eurozone releasing their Consumer Price Index and industrial production data this morning. Expect GBP/EUR to follow equity markets closely in the short term, with JPMorgan releasing their first quarter results in the US later today.

Sterling climbs to 3-month high against the US dollar

In Wednesday’s trading the pound strengthened over the US dollar by 1.06 cents to close the day at the 1.4997 level, after data from the Royal Institution of Chartered Surveyors suggested that interest from new home buyers increased in March. Improved sentiment amongst investors, especially with regard to the finance sector, also saw the pound receive a boost. The pound reached a day high of 1.5035 yesterday, which was a 3 month high and the first time it had traded above 1.50 since January 12th. In the US, it was announced that consumer prices fell 0.1% in March, down 0.4% on the year, and marks the first time that the US economy has seen deflation in over half a century. However, once volatile food and energy prices are removed, consumer prices actually stand up 1.8% on the year.

In today’s trading the pound has pared some of its gains as investors have reined in some of their risk appetite. Later today building permits, continuing jobless claims, initial jobless claims, housing starts and the Philadelphia Fed Manufacturing Survey data is released in the US. There are no major economic announcements in the UK today.

Euro trades mixed against the US dollar

The euro traded mixed against the US dollar yesterday, falling sharply in the morning as the market braced for another batch of US data following fresh signs of weakness in the world's largest economy. Market players were looking ahead to US data including consumer prices, housing figures and the Federal Reserve's Beige Book survey of economic conditions, and were hesitant about the data following the release of worse than expected Retail Sales figures on Tuesday. The euro was also undermined by comments from ECB council member Axel Weber, who said the central bank will announce a package of ‘non-standard measures’ in May.

In the afternoon the euro recovered some ground against the US dollar, after the Fed’s Beige Book showed that the US economic contraction continued through early April but the pace of decline was decelerating in 5 of the 12 Federal districts. The Dow Jones rose following this news, improving risk appetite.

The dollar was also pressured a little yesterday by rising gold prices, as strong physical demand from the world's largest bullion market, India, offset worries caused by a surprise drop in US consumer inflation, which could dent the metal's allure as an inflation hedge. Gold is often bought as an alternative investment to the US currency.

However, the euro has weakened against the dollar again this morning in the run up to the release of eurozone Consumer Price Index and Industrial Production figures at 10.00 BST. In the US Jobless Claims figures, housing data and the Philadelphia Fed survey are released this afternoon.

New Zealand undermined by investor caution

The New Zealand dollar lost ground yesterday, as conflicting reports out of the US had investors remain cautious. While there were some positives in the financial sector, economic data has suggested that the world economy may be a long way off from fully recovering. Domestically the economy is still struggling and markets are fully pricing in a further interest rate cut when the Reserve Bank of New Zealand meets at the end of the month.

Australian dollar trades mixed against sterling

The Australian dollar lost ground briefly to sterling yesterday, before recovering after the UK economy received a boost by better UK housing data. Figures revealed that although UK house prices still contracted last month, their decline was the slowest in 12 months. Sales volumes also picked up from record low levels. The Aussie also received support later in the day as equity market gains continued to support the high yielders. Little data is due today so direction will largely come from equity markets and risk appetite.