Sterling down vs. euro after jobless data

The pound eased back against the single currency yesterday, losing 0.35 cents despite improved risk appetite in markets.

• It was confirmed yesterday morning that Britain’s unemployment rate has surged to a 12 year high. The UK jobless rate now stands at 7.6%, with it expected to peak next year around the three million mark.
  
• Official data out of the eurozone revealed that inflation during June was negative for the first time since the single currency was introduced in 1999 – analysts are not expecting the 16-country bloc to remain in deflationary territory for very long however.
  
• The FTSE 100 enjoyed another good day with the blue chip share index rising by 2.6% to close at its highest close in four weeks. Equity markets around the world were boosted by strong US corporate earnings data, with the Fed also stating that the economy will grow between 2.1% and 3.3% in 2010.
  
• Sterling is again sluggish in early trading this morning with little economic data out of the UK or the eurozone today. Investors will keep a keen eye on US corporate earnings and the direction of equity markets for the time being.

Sterling up as risk appetite improves

Sterling recovered ground against the US dollar yesterday, rising by more than a cent to finish the day at $1.6422.

• The pound made sharp gains in the early morning yesterday, after a poll suggested China is on track to achieve its 8% growth target this year, while Asia's worst hit economies of Singapore and Taiwan will see a sharp turnaround next year as the entire Asian continent rebounds.
  
• The optimism this poll triggered led to decreased demand for the safe-haven of the dollar.
  
• Sterling did pare some of its gains against the dollar later yesterday morning, however, after British employment figures revealed a larger-than-expected rise in UK unemployment.
  
• British unemployment hit its highest rate since January 1997 in the three months to May, the figures showed.
  
• However, the pound recovered its losses in the afternoon after very strong corporate earnings figures from Intel and Goldman Sachs boosted investor confidence and triggered a sell-off in the greenback.
  
• The pound has begun losing some ground to the US dollar this morning, after news that CIT, a mid-sized US bank, may soon file for bankruptcy.

Euro strengthens after stellar quarterly results

The euro strengthened by 1.42 cents (1.02%) against the US dollar yesterday to close the day at $1.4107.

• Stellar quarterly results from investment bank Goldman Sachs and Intel, the chipmaker, buoyed risk appetite in the market yesterday as “haven” demand for the greenback subsided.
  
• This news also spurred global equity markets, with the Dow Jones eventually finishing the day up over 3% yesterday.
  
• Elsewhere, news that China’s foreign exchange reserves, the world’s largest, had grown by a record $178.3 billion to $2,130 billion in the second quarter also undermined the dollar.
  
• Finally, the announcement that US core CPI had risen to 0.2% in July, as expected, from 0.1% last month also aided the single currency’s gains yesterday as the prospect of deflation now looks increasingly unlikely.
  
• There are no major announcements due in the eurozone today, whilst in the US TIC Long-Term Purchases data is out at 14.00 BST.

Aussie up after risk appetite improves

Sterling weakened against the Australian dollar yesterday, losing over a cent to finish the day at 2.0441.

• The Australian dollar made some gains in the early morning yesterday, after a Reuters poll suggested China is on track to achieve its 8% growth target this year, and the entire Asian continent will rebound next year.
  
• China is Australia’s biggest trading partner, although a diplomatic row has cast a shadow over trade ties recently.
  
• The Australian dollar extended its gains against sterling yesterday afternoon, as very strong corporate earnings figures from Intel and Goldman Sachs boosted demand for riskier assets.
  
• However, the Australian dollar lost some of its gains overnight, after news that CIT, a mid-sized US bank, may soon file for bankruptcy, undermined demand for riskier assets.

Kiwi up over 2 cents vs. sterling

The pound lost more than 2 cents to the New Zealand dollar yesterday to finish the day at 2.5315.

• The New Zealand dollar made strong gains against the pound yesterday morning, as sterling was undermined by data showing UK unemployment hit its highest level since January 1997, raising doubts about the possibility of a recovery in the British economy.
  
• The New Zealand dollar extended its gains against sterling yesterday afternoon, as very strong corporate earnings figures from Intel and Goldman Sachs boosted demand for riskier assets such as the kiwi.
  
• However, the pound recovered all its losses overnight, as the kiwi came under broad selling pressure after ratings agency Fitch revised its outlook on New Zealand’s AA-plus credit rating to negative.