Pound hits one month low against the euro

Sterling hit a one month low against the single currency yesterday, finishing the day 0.55 cents lower – the third consecutive day of losses for the pound.

• Sterling was on the back foot early in London trading following manufacturing output falling by 0.5% in May – analysts were suggesting that the sector would actually grow by 0.2% during the month.
  
• The National Institute of Economic and Social Research also stated that GDP during the second quarter has contracted by 0.4%, dashing hopes that the UK may have escaped the recession.
  
• Yesterday’s gains for the single currency were extended after figures showed German factory orders unexpectedly jumped to 4.4 percent, contrasting sharply with the weak UK data.
  
• The weak economic data emanating from the UK has raised the prospect that the Bank of England will expand its quantitative easing programme at its latest policy meeting tomorrow. Interest rates are expected to stay on hold at 0.5%.
  
• Halifax release their house price survey today within the UK, whilst the EU release their revised first quarter GDP figures. Germany will reveal their industrial production figures later in the morning giving an insight into how the sector is faring at present.

Pound loses further ground to the US dollar

The pound lost further ground to the US dollar yesterday, falling by 0.91% to close the day at 1.6137.

• Concerns over the health of the British economy were fanned yesterday after the announcement of worse than expected industrial production data saw risk aversion spread and the pound heavily sold. Manufacturing output fell by 0.5% in May and the wider measure of Industrial Production contracted 0.6%, which surprised investors who were expecting both measures to grow by 0.2%.
  
• This news damaged hopes that the UK economy would bounce back in the second quarter after contracting at the fastest rate for 50 years in the first 3 months of this year. Indeed, the National Institute of Economic and Social Research announced that the UK economy shrank by 0.4% in the second quarter and admitted that they no longer believe that the recession reached bottom in March.
  
• The pound has continued to slide in this morning’s trading ahead of tomorrow’s Bank of England interest rate policy meeting, where many investors now believe that the BoE will expand their quantitative easing programme in a bid to encourage economic growth.
  
• In today’s trading Halifax House Price data is announced in the UK this morning, whilst in the US MBA mortgage applications, EIA crude oil stocks change and consumer credit figures are announced.

Euro weakens against US dollar on growing risk aversion

The euro weakened against the dollar by 0.60 cents yesterday, finishing the day at $1.3923.

• The euro was briefly boosted yesterday after data showed that German factory orders recorded their largest jump in two years . Orders rose 4.4 per cent in May, much better than the 0.5 per cent increase forecast.
  
• However, worries over the deepening recession resulted in risk aversion and prompted investors to buy into the safe-haven dollar, undermining demand for the euro and allow the dollar to finish up on the day.
  
• The euro weakened further against the dollar overnight as investors continue to fret that optimism about a global economic recovery has been overdone.
  
• Investors are awaiting comments on the dollar's role as the world's reserve currency before a three-day meeting of leaders of the Group of Eight industrial nations and leading developing nations in Italy that starts later on Wednesday.
  GDP figures are due to be released in the eurozone this morning as well as industrial production in Germany. In the US, MBA Mortgage Applications and EIA Crude Oil Stocks change will be announced this afternoon.

Pound trades mixed against New Zealand dollar

The pound lost ground to the New Zealand dollar yesterday morning, before recovering all its loses in the afternoon to close 0.33% up on the day at 2.5656.

• Sterling fell against most currencies, including the kiwi dollar, yesterday morning after weak British industrial production data fanned further doubts about a quick recovery for the UK economy.
  
• The figures showed British manufacturing output fell by 0.5 percent in May and industrial production shrank by 0.6 percent, against forecasts for a 0.2 percent rise in both measures.
  
• Sterling dipped to a 1-week low against the New Zealand dollar following the release, but recovered all its losses in the afternoon as investors began to shy away from higher yielding currencies.
  
• The pound held its gains overnight, as a gloomy outlook for the world economy was backed up by dismal private-sector orders for Japanese machinery, a key leading barometer of the state of Asian demand and the region's manufacturing sector. Orders unexpectedly fell to a record low in May, undermining demand for higher yielding currencies such as the New Zealand dollar.

Sterling trades mixed against the aussie dollar

The pound fell sharply against the Australian dollar yesterday morning, hitting a 3-week low before recovering in the afternoon to finish the day up.

• Sterling fell broadly yesterday morning after weak UK industrial production data fanned further doubts that the economy is poised for a quick recovery.
  The figures showed British manufacturing output fell by 0.5 percent in May, while industrial production shrank by 0.6 percent, in contrast to forecasts for a 0.2 percent rise in both measures.
  
• The pound sank to a 3-week low against the aussie dollar following the data, but recovered ground in the afternoon as investors sold the higher yielding aussie amid growing risk aversion.
  
• Sterling finished the day marginally up against the Australian currency at 2.0449, and has held its ground overnight as signs an economic recovery in Asia was struggling to gain traction deterred investors from buying riskier currencies.