Sterling down after weak GDP and current account figures

Sterling weakened by 0.32 cents (0.27%) against the euro yesterday to close the day at 1.1729.

• In early trading yesterday sterling strengthened against the single currency, after Britain’s third-largest mortgage broker, Nationwide, reported a rise in house prices in June, the third rise in four months. Some traders took this as a sign that the ailing UK property market may be finally bottoming out.
  
• However, much worse-than-expected revised first-quarter UK GDP figures sent the pound into negative territory mid-morning. The data showed the UK’s economy contracted by 2.4% in the first three months of 2009, the largest decline in 50 years and a marked drop on the -1.9% originally published.
  
• The news that Lloyds Banking Group was to cut 2,100 jobs over the next three years also shook investor confidence in the market, as did a worse-than-expected UK current account figure released mid-morning, which registered at -£8.5 billion this month, well below analyst forecasts of -£6.5 billion.
  
• In trading so far today, the pound has resumed its slide against the single currency as investors continue to digest yesterday’s surprisingly weak GDP figure.
  
• There are no major announcements due in the eurozone today, whilst in the UK Manufacturing PMI data is due at 09.30 BST.

Sterling weakens over a cent vs. USD

Sterling weakened by 1.06 cents (0.64%) against the US dollar yesterday, finishing the day at $1.6461.

• In early trading yesterday sterling hit an eight-month high against the dollar, after better-than-expected data released by Nationwide buoyed investor hope that the ailing UK housing market may soon recover. Confounding predictions of a fall, the building society reported a 0.9% rise in house prices this month, taking the annual rate of house price decline to 9.3%.
  
• However, a scaling down of the UK’s revised first-quarter GDP figure from an initial reading of -1.9% to -2.4% prompted traders to dump the pound mid-morning, as some of the recent optimism surrounding the UK’s recovery cooled.
  
• Sterling’s falls were further extended yesterday afternoon following surprisingly weak US consumer confidence index data. It revealed a fall in June to 49.3 from a downwardly revised 54.8 in May, prompting investors to sell the higher-yielding pound to reduce risk.
  
• In trading so far today, the pound has continued its slide against the greenback as investors brace themselves for some important announcements today.
  
• In the UK, Manufacturing PMI data is due at 09.30 BST, whilst in the US ADP Non-Farm Employment Change figures are out at 13.15 BST, followed by ISM Manufacturing PMI and Pending Home Sales at 15.00 BST.

Euro falls as risk appetite wanes

The euro fell by 0.5 cents (0.36%) against the US dollar yesterday to finish the day at $1.4031.

• In early trading yesterday the single currency first strengthened then weakened against the dollar, after data released in the eurozone knocked early risk appetite in the market.
  
• Figures showed loans to eurozone businesses and households slowed to 3.7% in May from a year ago, well below forecasts of 4.6% and the previous month’s reading of 4.9%. This underscored the urgent need for the European Central Bank’s 442 billion euro liquidity injection, announced last week, to take effect soon.
  
• Poor US consumer confidence index data released mid-afternoon also hit risk appetite in the market, showing a drop in June to 49.3 from a downwardly revised 54.8 in May. This prompted investors to buy back into the perceived safety of the greenback.
  
• In trading so far today the single currency has risen slightly against the greenback, as traders continue to pick over yesterday’s economic releases.
  
• There are no major announcements due in the eurozone today, whilst in the US ADP Non-Farm Employment Change figures are out at 13.15 BST, followed by ISM Manufacturing PMI and Pending Home Sales at 15.00 BST.

Pound falls sharply vs. aussie after GDP data

The pound fell sharply against the Australian dollar yesterday after the release of worse-than-expected revised GDP figures from the UK.

• The pound began weakening prior to the release of the GDP data, as falling equities dragged sterling lower.
  
• Sterling’s losses were exacerbated by the GDP figures, which revealed that Britain's economy contracted more sharply than previously estimated in the first quarter, with gross domestic product showing a quarterly decline of 2.4% compared with the previous estimate of a 1.9% decline.
  
• Sterling continued to lose ground against the Australian dollar overnight, after the aussie got a boost from the release of Australian retail sales figures, which rose for the third consecutive month in May.

Sterling rises against kiwi after RBNZ's plans

Sterling experienced choppy trading against the New Zealand dollar yesterday.

• The pound rose against the kiwi dollar in the early morning, after the Reserve Bank of New Zealand announced details of new liquidity requirements for domestic banks, which may increase the cost of lending by 10 to 20 basis points.
  
• However, sterling began to weaken before the release of revised British GDP figures, and continued to fall after the figures revealed that the British economy contracted more sharply than previously estimated, with GDP showing a quarterly decline of 2.4% compared with the previous estimate of a 1.9% decline.