Sterling strengthened against the single currency yesterday as a strong performance by London’s blue chips fuelled investor appetite for the pound. Following Wednesday’s 2% gains, the FTSE 100 added another 1.3% yesterday as renewed hope the global economic recession may be easing increased. In early trading, the pound strengthened against the euro as worse-than-expected unemployment data released by the European Monetary Union revealed the rate had reached 8.9% in March, up 0.2% from the previous month. In addition, an improvement in UK consumer confidence to levels not seen since April 2008 also contributed to sterling’s gains against the single currency, as investor confidence that the country may soon come out of recession improved. The GfK/NOP survey showed a rise for the third consecutive month, up three points in April to -27. Sterling’s gains were also driven by strong performance on equity markets, with London rising strongly following steep losses earlier in the week over fears the swine flu outbreak could turn into a pandemic.
However, the pound’s gains yesterday morning were capped to some extent after data released by mortgage lender Nationwide revealed UK house prices fell 15% compared to this time last year. It showed the average house price dropped by 0.4% on the month, partly revising a surprise 0.9% increase in March. Despite this, the pound strengthened against the euro yesterday morning, aided by speculation about what the European Central Bank intends to do at their policy meeting next week to stimulate the eurozone economy. Following the US Fed’s decision to continue with their purchasing of long-term government debt as planned, citing some tentative signs of economic recovery and strong equity market performance as the basis for their decision, investors in the eurozone speculated that the ECB could well announce a similar strategy next week ,as it appears to be working in the US. Although quantitative easing – as the process is known – may well get the region out of recession in the long-term, in the short-term it would likely see appetite for the euro reduce, as a general feeling the ECB are “behind-the-curve” would surface. As a result, speculation over what policies the ECB intends to implement weighed on the euro yesterday, resulting in a weakening against the pound.
There are no announcements in the eurozone today because of Labour Day, whilst in the UK important Purchasing Manager Index Manufacturing data for April is due at 09.30 BST.
Friday 1 May 2009
Pound strengthens against the US dollar in choppy trade
The pound strengthened against the US dollar in a choppy day’s trading yesterday, reaching a two-week high as risk appetite returned and share prices gained. Investors’ hopes that the worst of the global economic slowdown could be over helped London’s blue chips reach their highest point for nearly three months, with the FTSE 100 adding 1.3% to Wednesday’s 2% gains. In early trading, the pound strengthened against the greenback after better-than-expected consumer confidence data released by GfK/NOP showed a three point rise to -27 this month, its third consecutive monthly rise and its highest level since April 2008.
Data released by Nationwide in the UK showed house prices resumed their decline in April. The mortgage lender said prices were 15% lower than this time last year, with the average house price falling 0.4% on the month compared with a surprise rise of 0.9% in March. But despite that news the pound continued to strengthen against the dollar yesterday morning, buoyed by strong performance on equity markets and the broad return of risk appetite following the Fed’s tentatively upbeat policy statement the previous evening. It appears markets largely shrugged off Wednesday’s worse-than-expected US GDP figure, with news about swine flu also taking a backseat, as investors looked beyond the safe-haven of the dollar to invest their capital.
However, soon after lunchtime a raft of important announcements in the US effectively wiped out sterling’s earlier gains, as investor wariness over the state of the global economy returned. Worse-than-expected Personal Spending data for March and Year-on-Year and Month-on-Month Core Personal Consumption Expenditure Prices index results produced some jitters in the market, therefore increasing demand for the perceived safe-haven of the greenback away from the riskier pound. Also, the announcement late in the day that Chrysler had filed for bankruptcy protection as part of a deal with Italian firm Fiat also reduced sterling’s earlier gains. The US carmaker will enter Chapter 11 bankruptcy under the US code, which will allow it to restructure without having to enter into liquidation. As a result, it will still be able to operate as a going concern as it clears up its remaining obligations ahead of a formal merger with Fiat. Although this news did reduce investor appetite for riskier currencies like the pound as investors feared there may be more bad news around the corner, the pound still finished the day up at $1.4787 on the back of strong equity market performance and the better-than-expected consumer confidence data released earlier in the day.
In early trading today, the pound has continued its steady rise against the greenback on improved risk appetite. At 9.30 BST, UK Purchasing Manager Index Manufacturing for April is released, whilst in the US Factory Orders figures for March and ISI Manufacturing data for April are due at 15.00 BST.
Data released by Nationwide in the UK showed house prices resumed their decline in April. The mortgage lender said prices were 15% lower than this time last year, with the average house price falling 0.4% on the month compared with a surprise rise of 0.9% in March. But despite that news the pound continued to strengthen against the dollar yesterday morning, buoyed by strong performance on equity markets and the broad return of risk appetite following the Fed’s tentatively upbeat policy statement the previous evening. It appears markets largely shrugged off Wednesday’s worse-than-expected US GDP figure, with news about swine flu also taking a backseat, as investors looked beyond the safe-haven of the dollar to invest their capital.
However, soon after lunchtime a raft of important announcements in the US effectively wiped out sterling’s earlier gains, as investor wariness over the state of the global economy returned. Worse-than-expected Personal Spending data for March and Year-on-Year and Month-on-Month Core Personal Consumption Expenditure Prices index results produced some jitters in the market, therefore increasing demand for the perceived safe-haven of the greenback away from the riskier pound. Also, the announcement late in the day that Chrysler had filed for bankruptcy protection as part of a deal with Italian firm Fiat also reduced sterling’s earlier gains. The US carmaker will enter Chapter 11 bankruptcy under the US code, which will allow it to restructure without having to enter into liquidation. As a result, it will still be able to operate as a going concern as it clears up its remaining obligations ahead of a formal merger with Fiat. Although this news did reduce investor appetite for riskier currencies like the pound as investors feared there may be more bad news around the corner, the pound still finished the day up at $1.4787 on the back of strong equity market performance and the better-than-expected consumer confidence data released earlier in the day.
In early trading today, the pound has continued its steady rise against the greenback on improved risk appetite. At 9.30 BST, UK Purchasing Manager Index Manufacturing for April is released, whilst in the US Factory Orders figures for March and ISI Manufacturing data for April are due at 15.00 BST.
Euro undermined by weak economic data
The euro weakened against the US dollar yesterday when worse-than-expected data released in the eurozone and the US, in addition to the bankruptcy of US carmaker Chrysler, weakened investors’ appetite for risk. In early trading the euro strengthened slightly against the greenback, as risk appetite improved following a surprisingly positive policy outlook briefing from the Fed the night before. However, the single currency’s gains were capped by a stream of less than positive news released yesterday morning. Initially, worse-than-expected unemployment figures in the eurozone raised investor concern that a recovery in the region may not yet be underway, as did news that US carmaker Chrysler was increasingly likely to go bankrupt by the end of the day. In addition, speculation surrounding whether the European Central Bank would follow the Fed and the Bank of England’s lead by implementing a quantitative easing program also weighed on investors’ minds ahead of the policy meeting next week. As a result, although the single currency did make some gains against the greenback initially, by lunchtime it was effectively unchanged on the day.
In the afternoon a raft of worse-than-expected economic data in the US induced a flight to the perceived safe-haven of the greenback, as investors became wary over the state of the global economy. Surprisingly poor Year-on-Year and Month-on-Month Core Personal Consumption Expenditure Prices and Personal Spending data for March resulted in some worries in the market, further exacerbated by the news late in the day that Chrysler had filed for Chapter 11 bankruptcy protection under the US code. Although the ailing car giant did meet a US government deadline to reach an agreement with Italian firm Fiat, the company’s bankruptcy did little to ease investor wariness that more bad news was not round the corner. As a result, they sold the single currency in favour of the perceived safe-haven of the greenback to reduce risk. The euro finished the day at $1.3227.
In early trading today, the single currency has clawed back its losses against the dollar from yesterday, as recent strong global equity market performance fuels hopes a recovery may be underway. There are no economic announcements in the eurozone today because of Labour Day, whilst in the US Factory Orders figures for March and ISI Manufacturing data for April are due at 15.00 BST.
In the afternoon a raft of worse-than-expected economic data in the US induced a flight to the perceived safe-haven of the greenback, as investors became wary over the state of the global economy. Surprisingly poor Year-on-Year and Month-on-Month Core Personal Consumption Expenditure Prices and Personal Spending data for March resulted in some worries in the market, further exacerbated by the news late in the day that Chrysler had filed for Chapter 11 bankruptcy protection under the US code. Although the ailing car giant did meet a US government deadline to reach an agreement with Italian firm Fiat, the company’s bankruptcy did little to ease investor wariness that more bad news was not round the corner. As a result, they sold the single currency in favour of the perceived safe-haven of the greenback to reduce risk. The euro finished the day at $1.3227.
In early trading today, the single currency has clawed back its losses against the dollar from yesterday, as recent strong global equity market performance fuels hopes a recovery may be underway. There are no economic announcements in the eurozone today because of Labour Day, whilst in the US Factory Orders figures for March and ISI Manufacturing data for April are due at 15.00 BST.
New Zealand dollar holds steady
The New Zealand dollar managed to hold its ground against sterling yesterday, although it neared 8 weeks lows against the aussie. Demand for higher risk currencies has grown with increased optimism over the early signs that the global economy may be starting to turn. This has given some support to the kiwi, but it continues to struggle against the aussie after the RBNZ lowered interest rates yesterday. With the RBNZ governor signalling rates could go even lower, markets are now expecting the yield variation between the aussie and kiwi to move further in favour of the aussie.
Australian dollar hits new decade highs
The Australian dollar reached new decade highs against sterling yesterday, before falling back to recent days ranges. Recent optimism that the global economy is starting to turn has helped demand for riskier currencies such as the aussie. Markets will largely focus on UK data today, with the release of manufacturing PMI and Mortgage lending. The M4 money supply growth data could also take on extra significance as it may provide an initial indication on whether the BoE's quantitative easing programme is starting to work. However, trade is likely to be relatively thin with European markets closed today and a public holiday in the UK on Monday.
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