Sterling hits its highest level against euro since early December 2008

The pound today hit its highest level against the euro since 3rd December 2008, boosted by improved investor sentiment about the state of the UK economy. Stronger-than-forecast UK Services PMI figures, together with a report released by Nationwide which showed UK consumers were more optimistic in May than they had been for six months, boosted the pound. Today’s gains cap an impressive rally for sterling against the single currency, which has risen over 4.5 cents since 11th May 2009.

Pound loses ground against the euro yesterday

The pound weakened by 0.22 cents (0.19%) against the euro yesterday to close the day at 1.1590.

• Sterling weakened against the euro in early trading yesterday, after it was announced an Abu Dhabi government-owned firm had sold roughly £3.5 billion of Barclays shares. The bank’s shares fell about 13% in early London trade as a result, as confidence in the UK banking sector diminished. The FTSE 100 as a whole was down 1% mid-morning.
  
• However, poor eurozone unemployment figures, which showed a rise to 9.2% in April, did cap the euro’s gains to some extent. This was its highest level since September 1999.
  
• Nevertheless, the euro ended the day in positive territory against sterling yesterday as falls in London equities dragged the pound down. The FTSE 100 lost 29.17 points in the day.
  
• In trading so far today sterling has strengthened against the euro, as investors turn their attention to tomorrow’s interest rate decisions from the European Central Bank and the Bank of England.
  
• There are no major announcements due in the eurozone today, whilst in the UK Services PMI figures are out at 09.30 BST.

Pound's rally against the US Dollar continues

The pound continued its rally against the US dollar yesterday, rising by 1.34 cents (0.81%) to finish the day at $1.6577.

• In early trading the pound fell from seven-month highs against the dollar, as the news that an Abu Dhabi government-owned firm had sold roughly £3.5 billion worth of Barclays shares shook confidence in the UK banking sector. The FTSE 100 dropped 1% in early trade as a result, prompting traders to lock in profits after a sharp rally for the pound over the last month.
  
• However, the dollar’s modest recovery petered out just after lunch as US stock futures turned higher, helping to renew demand for higher risk currencies like the pound. Investors also drew heart from Monday’s better-than-expected manufacturing activity surveys coming out of China, the eurozone, the UK and the US.
  
• Sterling ’s gains were also extended following the release of much better-than-expected Pending Home Sales data in the US. This month’s reading of 6.7% was well-ahead of the 0.4% analysts had expected and also a healthy gain on the 3.2% registered last month. As a core driver of the global economy, news that the US housing market may be tentatively recovering was received positively by investors, prompting them to again look beyond the safe-haven of the greenback.
  
• In trading so far today the pound has resumed its rise against the greenback as investors continue to buy into the story the UK economy is on the cusp of recovery.
  
• In the UK, Services PMI data is out at 09.30 BST, whilst in the US, ADP Non-Farm Employment Change and ISM Non-Manufacturing PMI figures are due at 13.15 BST & 15.00 BST respectively.

Euro finishes up against the US dollar

The euro strengthened by 1.43 cents (1.01%) against the US dollar yesterday, finishing the day at $1.4300.

• In early trading yesterday the euro strengthened against the dollar, as improved risk sentiment continued to sweep the market. Monday’s better-than-expected manufacturing data from China, the UK, the US and the eurozone drove the single currency’s gains throughout the day, as investors speculated we may really be on the cusp of global economic recovery.
  
• However, the worst eurozone unemployment figures since September 1999 out mid-morning dampened investor demand for the single currency to some extent. Unemployment rose to 9.2% in April.
  
• But much better-than-expected US Pending Home Sales data stoked demand for riskier currencies like the euro. With the property market such an important driver of the US economy, this month’s reading of 6.7% was a positive sign it may be on the mend. Analysts had been expecting 0.4%.
  
• In trading so far today, the euro is slightly up against the greenback as improved risk appetite continues to sweep the market.
  
• There are no major announcements due in the eurozone today, whilst in the US, two important figures are set to be released. Firstly, ADP Non-Farm Employment Change data is out at 13.15 BST, followed by ISM Non-Manufacturing PMI data at 15.00 BST.

Aussie gains as risk appetite continues

The Australian dollar made small gains against sterling yesterday, as further upbeat economic data extended investor risk appetite and boosted demand for high yielding currencies such as the aussie.

• UK data revealed an increase in mortgage approvals for April, which continued to bolster hopes of a recovery in the UK economy.
  
• However, markets still remain cautious about the turnaround, so sentiment is likely to remain slow to move.
  
• Sterling was also hampered by a fall in UK share markets, largely driven by news that an Abu Dhabi consortium had sold a large stake in Barclays Plc.
  
• Investors will seek further clues today of a possible UK recovery from the release of Services PMI figures at 09.30 BST.

Kiwi dollar weakens off recent highs

The New Zealand dollar fell off recent highs yesterday as investors proceeded to book profits on strong gains, before recovering ground overnight amid growing risk appetite.

• The kiwi still remains supported by a lift in appetite for high yielding currencies, as the wave of optimism about an economic recovery continues.
  
• This suggests the kiwi could make further gains if the momentum continues.
  
• However, analysts have warned that some indicators suggest that the kiwi is already overvalued.