Sterling hits year high against EUR

Sterling strengthened against the euro by 1.05 cents (0.91%) yesterday to close the day at a six-month high of 1.1696.

• In early trading yesterday the pound rose against the single currency as gains on London equities buoyed investor confidence in the UK’s economy. The FTSE 100 was up 1.6% in early trade.
  
• A greater-than-expected fall in French industrial output in April did little to ease the euro’s plight mid-morning, as it revealed a contraction of 1.4%, over the 0.2% predicted.
  
• Further aiding sterling’s gains were stronger-than-forecast UK manufacturing figures, which revealed 0.2% growth in the sector last month, versus the 0.1% contraction expected. Industrial production was also up 0.3% this month.
  
• In trading so far today the pound has resumed its rally against the single currency, breaking through the 1.17 level as investors continue to digest recent data releases.
  
• There are no major announcements due in the UK or eurozone today.

Sterling continues its rally vs. USD

Sterling continued its recent rally against the US dollar yesterday, rising by 0.51 cents (0.31%) to finish the day at $1.6356.

• In early trading yesterday the dollar fell against sterling, as global stock prices were lifted by improved risk appetite in the global economy. The greenback struggled as the market reassessed the chances of a US interest rate rise at the end of this year, following positive jobs data released last Friday.
  
• Sterling ’s rally was also helped by surprisingly positive UK manufacturing figures, which revealed a 0.2% growth in the sector last month. Industrial production rose 0.3% over the same period.
  
• However, a fall in the US Trade Balance to -$29.2 billion capped sterling’s gains to some extent as investors questioned the health of the world’s largest economy.
  
• However, the news that Russia’s central bank wants to cut the amount of currency reserves it holds in US Treasuries and buy IMF-issued bonds instead maintained the general downward pressure on the dollar mid-afternoon. It is currently the fifth largest holder of US government debt, with roughly $404.2 billion foreign exchange reserves in Treasuries.
  
• In trading so far today, the pound has continued its rise against the greenback as improved risk appetite sweeps the market.
  
• There are no major announcements due in the UK today, whilst in the US Retail Sales data is due at 13.30 BST.

Euro weakens after automatic sell off orders kick in

The euro weakened 0.86 cents (0.61%) against the US dollar yesterday to close the day at $1.3978.

• In early trading yesterday the dollar dipped against the single currency, as the market questioned how likely a US interest rate cut is later this year. Following better-than-expected American jobs data on Friday speculation grew earlier this week that a cut may be on the cards, but investors began to question its likelihood yesterday.
  
• However, worse-than-expected US Trade Balance figures trimmed the euro’s gains in the early afternoon, after they revealed a fall to -$29.2 billion this month.
  
• News that Russia’s central bank, the fifth largest holder of US government debt, wants to cut the amount of currency reserves it holds in US Treasuries and buy IMF-issued bonds instead initially boosted the euro. However, as it rose it triggered automatic sell orders, which pushed the single currency down 0.3% in late trading.
  
• In trading so far today the euro has headed back over $1.40, as investors continue to pour over recent economic data.
  
• There are no major announcements due in the eurozone today, whilst in the US Retail Sales data is out at 13.30 BST.

Aussie weakens on improved UK sentiment

The Australian dollar weakened slightly against sterling yesterday.

• The aussie’s losses against the pound came despite BoE policymaker, Kate Barker, suggesting that British interest rates were likely to remain low for an extended period of time.
  
• Sterling was boosted by industrial output figures yesterday, which rose unexpectedly in April.
  
• The rise was the first in over 12 months and provided further evidence that the UK economy could return to positive growth within the second or third quarter of this year.

Kiwi's rate hold helps NZD

The New Zealand dollar gained sharply against the aussie and sterling yesterday, as the Reserve Bank surprised some investors by keeping interest rates on hold at 2.5 percent.

• The pause in rates was the first since July of last year, and was designed to stimulate the economy which has been in recession since last year.
  
• However, no growth is expected until the end of 2009, so the RBNZ did leave the door open for further cuts after it has assessed the impact of its previous aggressive rate cutting.