Kiwi loses ground against aussie & sterling

The New Zealand dollar lost ground against the aussie and sterling yesterday, as investors largely focused on the New Zealand government budget due on Thursday.

• However, the kiwi recovered ground sharply against the pound overnight, after the National Bank of New Zealand's monthly survey of business confidence showed that confidence is up across all business segments.
  
• But the New Zealand dollar’s gains were cut short after dairy giant Fonterra cut its forecast for milk prices, bad news for the dairy sector in New Zealand.

Aussie strengthens back against sterling

The Australian dollar strengthened back against sterling yesterday, after a lack of domestic data saw investors concentrate on equity markets and the US.

• A rise in US consumer confidence, and a subsequent move up in equity markets, saw an increased demand for riskier assets.
  
• This helped support the high yielding aussie, and movements were also exacerbated by continuing thin trade as traders returned to work in the UK and US.
  
• Given the lack of major economic data out of the UK this week direction is likely to continue to come from equity market movements and market confidence.

Euro weakens against greenback

The euro weakened against the US dollar yesterday by 0.29 cents (0.21%), closing the day at $1.3984.

• In early trading yesterday the euro weakened by over a cent against the dollar, following news that German regulator BaFin had warned that toxic debt of the country’s banks would blow up “like a grenade” unless they took advantage of government bad-bank plans to prepare for the next phase of the crisis.
  
• However, the euro clawed back some of its earlier losses yesterday afternoon following the release of better-than-expected US consumer confidence data yesterday afternoon. The Conference Board consumer confidence index rose to 54.9 in May from an upwardly revised 40.8 in April. This was much stronger than the 42.0 analysts had been forecasting. Nevertheless, the single currency still finished the day slightly down against the dollar.
  
• In trading so far today the euro has resumed its slide against the greenback, as investors continue to speculate over how far off an economic recovery the eurozone may be following yesterday’s report questioning the health of the German banking system.
  
• There are no major announcements due in the eurozone today, whilst in the US Existing Home Sales data is out at 15.00 BST.

Sterling rose against US dollar yesterday

Sterling strengthened against the US dollar yesterday by 0.18 cents (0.11%), finishing the day at $1.5924.

• In early trading yesterday, sterling weakened against the greenback as traders booked profits following the pound’s rally last week. Early falls on global equity markets also contributed to sterling’s falls.
  
• News of more missile launches by North Korea also triggered safe-haven demand for the dollar, with investors selling off the riskier pound.
  
• However, stronger-than-forecast US consumer confidence data released yesterday afternoon drove demand for sterling, pushing it into positive territory. The Conference Board’s index rose from an upwardly revised 40.8 in April to 54.9 in May, well ahead of the 42.0 analysts had been expecting.
  
• In trading so far today, the pound has resumed its rise against the greenback as improved risk sentiment continues to flood the market.
  
• In the US, Existing Home Sales data will be released at 15.00 BST today. There are no major announcements due in the UK.

Sterling strengthened vs. single currency yesterday

The pound strengthened against the euro by 0.38 cents (0.33%) yesterday to finish the day at 1.1385.

• In early trading yesterday sterling strengthened against the euro, after news that Germany’s financial regulator BaFin had warned that toxic debt of the country’s banks would explode “like a grenade” unless they accepted government bad-bank plans to prepare for the next phase of the crisis.
  
• The pound’s gains were extended yesterday afternoon after London equity markets pared early losses to head into positive territory. The shortage of economic data out in the UK this week means that investors are likely to take their lead from equities for the foreseeable future. The FTSE 100 eventually finished the day up 46.43 points at 4411.72.
  
• In trading so far today sterling has continued its rise against the single currency after Asian stocks hit their highest level in more than seven months overnight.
  
• There are no major announcements due in UK or eurozone today.