Sterling finishes slightly down against single currency

Sterling touched a 5-week low against the single currency in early trading yesterday before recovering late in the day to finish just a quarter of a cent down.

• The pound came under selling pressure in early trading as equity markets in Europe opened lower than Friday.
  
• Investors were initially concerned about the economic prospects facing the global economy at present, however these concerns soon abated as risk appetite returned to markets.
  
• The FTSE 100 ended the day 1.8% higher, boosted in particular by stronger mining and energy stocks.
  
• In early trading today the FTSE 100 is marginally up, boosted by economic news released overnight. The Royal Institute of Chartered Surveyors released better-than-expected news about the housing market, their reading the best since September 2007.
  
• The British Retail Consortium has also revealed much better-than-expected retail sales figures, boosted by the hot weather in June.
  
• Investors will take note of inflation figures released in the UK this morning and the ZEW economic sentiment survey out in Germany.

Sterling strengthens after equities rally

Sterling strengthened against the dollar yesterday by 0.15 cents (0.09%) finishing the day at $1.6225.

• Sterling weakened further against the dollar in early trading yesterday, following the news that Lloyds Plc is likely to announce further losses in its first half earnings report. The news was reported by the Sunday Times from an unknown source and could be as much as £13 billion.
  
• However losses were limited as stock markets rallied, in particular in the US following comments made by analyst Meredith Whitney who stated that investors should buy shares in Goldman Sachs and that banks are likely to improve their earnings by 15%.
  
• Jobless claims data due in the UK tomorrow will be of particular importance as it is expected to show an increase in claims in June from the May forecast. This may have an adverse effect on sterling.
  
• There are several significant announcements due in the UK today, including Consumer Price Index and Retail Price Index at 09.30 BST. If the results are weaker than expected then that may result in the Bank of England extending their quantitative easing plan and possibly further weakening the pound. In the US, Producer Price Index and Retail Sales data will be of most significance, when they are released at 13.30 BST.

Euro strengthens after risk appetite returns

The euro strengthened against the US dollar by 0.41 cents (0.29%) yesterday to close the day at $1.3975.

• Initially, the single currency headed lower yesterday as stuttering equity markets continued to hamper risk appetite in the market. However, they later picked up, spurring the euro’s gains yesterday afternoon.
  
• In addition, news that the Japanese government had upgraded its economic outlook for the third consecutive month provided additional momentum to “riskier” currencies as investors looked beyond the perceived safety of the greenback.
  
• Finally, the news that the US Federal Budget Balance was ahead of forecast at -$94.3 billion also spurred movement away from the dollar yesterday evening. The reading was a significant improvement on June’s reading of -$189.7 billion, as well as slightly above analyst predictions of -$95 billion this month.
  
• There are major announcements due in both the eurozone and US today. In the former, German ZEW Economic Sentiment data is out at 10.00 BST, whilst in the latter, Retail Sales and PPI is due at 13.30 BST.

Aussie heads higher against GBP

The pound weakened against the Australian dollar yesterday, losing a cent to finish the day at 2.0714.

• The Australian dollar recovered some ground yesterday as a rise in US stocks gave the riskier currency a boost.
  
• However, trading was choppy yesterday as sentiment remains fragile at the moment, with markets speculating that recent optimism was overdone.
  
• The aussie gained further ground against the pound overnight, as the Australian currency was supported by stronger business data.
  
• The National Australia Bank Business Conditions report climbed by 12 index points to -2, taking it back to the level before the collapse of Lehman Brothers in September last year.

Kiwi strengthens after markets rally

Sterling weakened against the New Zealand dollar yesterday, losing almost 2 cents to finish the day at 2.5653.

• The pound made small gains against the New Zealand dollar early yesterday, but fell sharply in the afternoon as Wall Street staged a morning rally amid hopes that US corporate earnings may not be as weak as expected.
  
• The rise in US equities increased demand for riskier currencies, offering the New Zealand dollar some support.
  
• However, the kiwi has weakened a little this morning as investors brace for earnings reports from the US, including an important one from Goldman Sachs.