Kiwi loses ground against the aussie and sterling yesterday

The New Zealand dollar lost ground against the aussie and sterling yesterday, after dairy giant Fonterra lowered its forecast payout due to weak prices.

• Overnight the kiwi also fell sharply after the New Zealand government’s budget announcement.
  
• Unveiling its budget for the coming year, the government said it would post its biggest budget deficit in 25 years and expects to remain in the red for up to 10 years, which would see debt more than doubling.
  
• The government will raise borrowing and move to rein in spending, including scrapping tax cuts, in a budget aimed at supporting the recession hit economy but staving off a possible credit rating downgrade.
  
• The New Zealand dollar fell sharply immediately after the budget, but has recovered much of the lost ground this morning as investors speculate that the measures may be enough to prevent a ratings downgrade.

Aussie finishes down against the pound

The Australian dollar edged to near four week lows against sterling yesterday, as mixed data out of the US helped curb investor risk appetite.

• Sterling also received added support as pessimism over the UK economy and financial sector finally seems to have started to recede.
  
• Despite there being no assurances that the UK economy has bottomed out, it does appear that investors are now taking a more optimistic view.
  
• Investors are also being drawn to sterling as markets are perceiving that the pound’s current levels are making UK assets cheap.

Euro weakens against the greenback

The euro weakened against the US dollar by 1.6 cents (1.14%) yesterday, finishing the day at $1.3824.

• In early trading yesterday, the dollar strengthened against the single currency following comments by European Central Bank member Erkki Liikanen, who was quoted as saying that the bank’s current key interest rate of 1% is not necessarily the lowest it could go.
  
• Question marks over the health of the eurozone economy going forward continued to weigh on the single currency yesterday afternoon, although better-than-expected US Existing Home Sales figures trimmed its losses to some extent. This month’s reading of 4.68 million was a significant improvement on the 4.57 million recorded in April, and also ahead of the 4.65 million analysts had been forecasting.
  
• However, investor concern over the state of the eurozone economy weighed heavily on the single currency in late trading yesterday, with it weakening further as a result.
  
• In trading so far today, the single currency has recouped some of the losses it endured yesterday as investors look ahead to some important US figures released later today. Core Durable Goods Orders (MoM) and Unemployment Claims figures are both out at 13.30 BST, whilst at 15.00 BST, New Home Sales figures are set to be released. There are no major announcements due in the eurozone today.

Sterling finishes up against the US dollar

The pound strengthened against the US dollar yesterday by 0.29 cents (0.18%), closing the day at $1.5953.

• In early trading yesterday, the pound strengthened against the dollar to a near seven-month high as rising equities in Asia and receding pessimism in the UK increased demand for perceived riskier assets.
  
• Better-than-expected UK mortgage approval and service sector data released yesterday morning further aided sterling’s gains, causing it to break through the psychological $1.60 level as a result.
  
• Sterling’s rally continued yesterday afternoon as investors pared back some of the large bets taken against the currency following the collapse of Lehman Brothers last year.
  
• In addition, stronger-than-forecast US Existing Home Sales data further buoyed investor appetite for riskier assets like the pound. May’s figure of 4.68 million was ahead of the 4.65 million analysts had been expecting, as well as a significant improvement on the 4.57 million recorded in April.
  
• However, in late trading, the pound pared some of the gains it had made over the day as traders booked profits. It finished up on the day nevertheless.
  
• In trading so far today, sterling has weakened against the dollar as investors take stock of the past week’s gains.
  
• In the UK, CBI Realised Sales figures are out at 11.00 BST, whilst in the US, Core Durable Goods Orders (MoM) and Unemployment Claims data are both out at 13.30 BST. At 15.00 BST, US New Home Sales figures are due to be released.

Sterling gains ground against the euro

The pound strengthened sharply against the euro yesterday by 1.52 cents (1.34%) to finish the day at 1.1537.

• In early trading yesterday sterling strengthened against the euro, after European Central Bank Governing Council member Erkki Liikanen said the bank’s key interest rate could go lower.
  
• Improved optimism surrounding the UK economy and financial sector drove sterling over a cent higher against the single currency mid-afternoon. Investor appetite for riskier assets like the pound were also helped by global equity market rises, buoyed by much better-than-expected US consumer confidence figures released on Tuesday.
  
• Finally, improved UK mortgage approval and service sector data also contributed to sterling’s strength yesterday.
  
• In trading so far today the pound has pared some of the gains it made yesterday, as investors take stock before important UK data out later today. At 11.00 BST UK CBI Realised Sales figures are due. There are no major announcements out in the eurozone today.