Sterling weakens slightly against euro on Friday

The pound weakened slightly against the euro on Friday by 0.05 cents (0.04%) to close the day at 1.1430.

• In early trading on Friday, the pound strengthened slightly against the euro after better-than-expected UK housing data buoyed investor hopes that an economic recovery in the UK may soon be underway. Nationwide’s survey showed UK house prices unexpectedly rose 1.2% during April.
  
• Strong London equity market performance also contributed to sterling’s gains early on, with the FTSE up 1.2% mid-morning.
  
• However, profit taking capped sterling’s gains mid-afternoon. In addition, the GfK/NOP UK consumer confidence survey hampered the pound’s progress as it came in at -27 for the second month in a row, ending three months of consecutive gains. As a result, sterling finished slightly down on the day.
  
• In trading so far today, the pound has strengthened against the single currency as investors eye important data and interest rate announcements out this week.
  
• There are no major announcements due in the eurozone today, however at 09.30 BST in the UK, Manufacturing PMI data is out.

Sterling finishes May on a high

The pound strengthened considerably against the US dollar on Friday, finishing the day up 2.44 cents (1.53%) at $1.6187.

• In early trading on Friday, sterling rose to a near seven-month high against the greenback as signs the global recession may have passed its worst prompted investors to seek riskier assets.
  
• Earlier worries surrounding the US government’s triple-A credit rating also subsided mid-morning on Friday after a series of successful US Treasuries auctions indicated healthy demand for US debt.
  
• Better-than-expected UK housing data released by Nationwide also buoyed appetite for the riskier pound on Friday morning. Its survey showed house prices rose by 1.2% in April.
  
• However, weaker-than-forecast US Preliminary GDP figures released mid-afternoon cooled the pound’s rally to some extent. This month’s reading of -5.7% was worse than the -5.5% analysts had been expecting, although it did represent an improvement on the -6.1% the month before.
  
• Nevertheless, the pound posted a considerable increase against the greenback over the day, capping an impressive 8.5% rise against the US currency in May.
  
• In trading so far today, the pound resumed its rise against the dollar as improved risk sentiment in the market continues.
  
• In the UK, Manufacturing PMI figures are due at 09.30 BST, whilst at 15.00 BST in the US, ISM Manufacturing PMI data is out.

Euro finishes strongly up against the US Dollar on Friday

The euro strengthened considerably against the US dollar on Friday by 2.15 cents (1.54%), finishing the day at $1.4158.

• In early trading on Friday, the euro hit its highest level against the greenback since early January after improved risk appetite swept the market. In particular, healthy demand for US debt after a series of successful US Treasuries auctions aided the single currency’s gains.
  
• Strong rises on European equity markets also weakened demand for the safe-haven of the dollar as investor demand for riskier assets increased.
  
• However, weaker-than-expected Preliminary GDP figures out in the US mid-afternoon tempered risk appetite in the market to some extent. This month’s reading of -5.7% was a slight improvement on the -6.1% the month before but much worse than the -5.5% analysts had forecast.
  
• Nevertheless, the euro still finished well up against the dollar on the day, closing at its highest level since 18 th December last year and marking an impressive 6.7% rise in May.
  
• In trading so far today, the single currency has resumed its rise against the greenback as improved risk sentiment continues to sweep the market.
  
• There are no major announcements out in the eurozone today, whilst in the US, ISM Manufacturing PMI figures are due at 15.00 BST.

Aussie stregthens against sterling

The pound lost ground to the Australian dollar on Friday, and continued to fall over the weekend.

• Sterling ’s fall came on the back of improving risk appetite and rising commodity prices, both of which boosted demand for the aussie dollar.
  
• The flow of information from the US, Japan, Europe and the UK continues to suggest that the intensity of the recession is easing.
  
• Oil closed above $US66 a barrel on Friday, up more than 100% from its lows five to six months ago, and copper prices also rose strongly.
  
• Also, another reason for the rise in the Australian dollar is the return of the carry trade: US investors are selling the US dollar to buy the Australian dollar and get returns well above what they can get in the States.

Kiwi finishes Friday up against the pound

The New Zealand dollar made gains against the pound on Friday, and continued to gain ground overnight as risk appetite improved.

• Growing optimism boosted appetite for risk, improving demand for higher yielding currencies, with the kiwi and the aussie dollar being major beneficiaries.
  
• The kiwi hit new multi-month highs against the US dollar and the euro overnight, and remained well supported against the pound.
  
• Rising commodity prices and renewed interest in carry trades also offered the New Zealand dollar some support.