Pound continues to slide against the euro

The pound continued Thursday’s slide against the euro on Friday, closing the day at 1.1169.

• In early trading Friday sterling recovered some of the previous day’s losses against the euro, as the market continued to digest Thursday’s policy decisions from the Bank of England and European Central Bank.
  
• Stronger-than-forecast Industrial Productions data for March released in Germany strengthened demand for the single currency mid-morning. Month-on-Month came in at 0%, much better than the -1.3% expected and the -2.9% recorded in February, whilst Year-on-Year was at -20.4%, again a rise from the -20.6% recorded last month and the -20.9% expected.
  
• However, strong London equity market performance capped the single currency’s gains to some extent, with the FTSE 100 up 1.7% at one point.
  
• But Thursday’s policy decisions by the BoE and ECB weighed on the pound throughout the day. Both involved some elements of surprise, but in the end news that the BoE was to expand its asset purchase programme by £50 billion to £125 billion was taken as a negative for sterling and a positive for the euro.
  
• The ECB’s decision to cut interest rates by a quarter point and unexpectedly buy some 60 million euros of covered bonds also contributed to the single currency’s gains. Investors were pleased the central bank was taking decisive action, however limited, to stem the region’s economic decline.
  
• In early trading today the pound has resumed its slide against the euro as the markets continue to digest last week’s announcements. There are no major data releases due in the UK or eurozone today.

Pound gains more than two cents against the US dollar

The pound strengthened by over two cents against the US dollar on Friday, finishing the day at $1.5231.

• In early trading on Friday the greenback slipped against the pound ahead of US Non-farm Payrolls data for April. Traders expected the US economy to have shed 590k jobs, less than the 663k in March, and therefore some took on more risky positions.
  
• However, trade was relatively quiet following Thursday’s results of US “stress tests”, which did not yield any negative surprises. Sterling remained above the psychologically key $1.50 level as a result.
  
• The news US employers only shed 539k jobs in April further extended sterling’s gains against the US dollar early Friday afternoon.
  
• However, worse-than-expected Month-on-Month and Year-on-Year Average Hourly Earnings figures released in the US capped demand for sterling to some extent.
  
• Elsewhere, strong gains on the FTSE 100 buoyed investor demand for the pound, primarily because the UK economy is so dependent on the financial services sector. At one point the FTSE 100 was up 1.7%, although it eventually finished the day up 1.44%.
  
• Optimistic mood in the financial markets improved risk sentiment on Friday afternoon, causing investors to buy into the perceived riskier pound, selling the safe-haven US dollar.
  
• In early trading today the pound has pared some of Friday’s gains against the US dollar, as investors continue to digest last week’s market-moving events.
  There are no major announcements due in the UK or the US today.

Euro makes strong gains against the US dollar

The euro rose markedly against the US dollar on Friday, strengthening 1.7% to finish the day at 1.3633.

• In early trading on Friday the euro rose against the US dollar, as expectations the pace of US job losses may be slowing prompted some traders to take on the “riskier” single currency.
  
• The euro also strengthened on the view that the ECB was taking action – however limited – to help the region’s ailing economy, following the announcement of their quantitative easing program the day before.
  
• The release of US Non-farm Payrolls data further strengthened the euro early in the afternoon, as it showed that US employers cut 539k jobs in April, much less than the 590k economists predicted and the 663k last month.
  
• The employment report did include some less encouraging signs, however, including a rise in the jobless rate to 8.9%, the highest since September 1983, but investors largely shrugged this off, with the euro hitting a one-month high in the early afternoon.
  
• The single currency continued its gains Friday afternoon, buoyed by news it had broken through its 200-day moving average, a key resistance on the charts. Analysts said buying by funds using trading models was behind some the currency’s strength.
  
• Finally, a general improvement in risk appetite following strong equity market performance on Friday also contributed to the euro’s gains, as investors sold the greenback to buy into the higher-yielding single currency.
  
• In early trading today the euro has pared some of Friday’s gains as investor hesitancy sets in ahead of some important announcements later in the week.
  
• There are no major announcements due in the eurozone today or the US today.

New Zealand dollar supported by increased optimism

The New Zealand dollar hit a 5-month high against the pound this morning on improved risk appetite.

• Increased optimism over the global economic outlook saw a surge in investor risk appetite
  
• The New Zealand dollar managed to hold onto recent gains against the Australian dollar and sterling overnight as a result
  
• But further kiwi gains may be limited as concerns still linger over the health of the domestic economy
  
• Economic fundamentals still remain weak in New Zealand, with interest rates likely remain low for an extended period of time

Australian dollar remains near 12 year high

The Australian dollar remains very well supported against the pound, after hitting a fresh 12 year high on Friday.

• The Australian dollar consolidated on its recent gains against sterling overnight, as gains in equity markets and stronger commodity prices continued to drive demand for the aussie


• While the aussie continues to benefit from an upturn in optimism and increased demand for risk, sterling continues to be weighed down by the Bank of England's surprise decision to announce an extension to its quantitative easing programme


• Many in the market had assumed the BoE would wait until its initial 3 month plan had finished and they could discern whether any further easing was required