Sterling finishes Friday slightly down against euro

Sterling weakened slightly against the euro on Friday, dropping 0.27 cents (0.23%) to close the week at 1.1729.

• In early trading on Friday, sterling fell against the single currency as traders booked profits from its recent rally. The prospect of G8 finance ministers meeting over the weekend meant investors were particularly keen to square off positions before then.
  
• The downward pressure on sterling was also aided following dovish comments from incoming Bank of England policy-maker Paul Fisher, who said the UK should be wary of complacency and that economic output was likely to fall in the second quarter.
  
• In trading so far today, the pound has strengthened against the euro as investor confidence about the UK economy’s recovery remains high.
  
• There are no major announcements due in the UK or eurozone today.

Sterling falls heavily after recent rally vs. US dollar

The pound fell by 1.48 cents (0.89%) against the US dollar on Friday, finishing the day at $1.6441.

• In early trading on Friday, sterling weakened considerably against the dollar as traders booked profits ahead of the G8 meeting over the weekend.
  
• Cautionary comments from UK Chancellor Alistair Darling also contributed to sterling’s fall mid-afternoon, after he warned that rising oil prices had the potential to be a “huge problem” for any recovery.
  
• So far today, the pound has resumed its slide against the greenback as investors eye important data out later this week.
  
• There are no major announcements due in the UK today, whilst in the US TIC Long-Term Purchases data is out at 14.00 BST.

Euro falls against US dollar as US Treasuries deemed safe

The euro weakened by 0.94 cents on Friday against the US dollar to finish the day at $1.4014.

• In early trading on Friday, the euro dipped against the dollar after a drop in eurozone industrial output reminded investors the region’s economy still had some way to go before it comes out of recession. It dropped 21.6% in April from a year ago, a record fall and well below the 20.2% dip expected.
  
• Concern earlier in the week that international reserve managers were set to diversify away from the US dollar also eased on Friday, aiding the greenback’s recovery. Comments from Kaoru Yosano, Japan’s finance minister, that his trust in US Treasuries was “absolutely unshakeable” rekindled demand for the US currency.
  
• In trading so far today, the euro has fallen sharply against the dollar as traders continue to book profits following gains in recent days.
  
• There are no major announcements out in the eurozone today, whilst in the US TIC Long-Term Purchases data is due at 14.00 BST.

Aussie strengthens initially after G8 meeting

The Australian dollar strengthened against sterling overnight as the outcome of this weekend’s G8 meeting held no surprises in terms of currency.

• Although there is still some support for investors taking on more risk, market optimism still remains guarded.
  
• So despite some signs that the UK economy may be starting to bottom out, investors will likely remain cautious until there are signs of economic growth, rather than diminishing contractions.
  
• No significant data is due out of Australia or the UK today so direction is likely to come from broader market movements.

Kiwi consolidates on recent gains

The New Zealand dollar consolidated on recent gains against sterling on Friday as demand for high yielding currencies took a breather.

• The RBNZ's decision last week to leave rates on hold sparked debate that the bank has effectively ended its easing cycle, despite it leaving the door open for further rate cuts.
  
• Investors are now starting to price in the potential for rate increase next year.
  
• The Kiwi was little moved by Retail sales data on Friday which revealed a bigger than expected rise in April. This was largely driven by car sales.