Risk caution over the kiwi, rallies sterling

The pound has finally capped its losses against the kiwi as cautious investors suspect that the risk rally may have gone too far.
• Sterling initially fell further against the kiwi yesterday evening as the investment trend continued to favour riskier assets.
• However, a weaker-than-expected New Zealand trade balance figure released late last night saw investors return to caution, which capped the kiwi’s gains.
• A fall in Chinese stocks added to selling pressure on the kiwi, with investors cautious about the pace of New Zealand’s recovery.
• The pound is currently trading 0.07% up for the day, but with CBI Realised sales data to be released at 11:00BST, a positive reading could extend these gains.
• The New Zealand monthly building consents data is released today at 23:45BST, which will give investors a good insight into the current economic health of the economy.

Pound caps losses vs aussie

Sterling finally reversed its downward slide against the Australian dollar closing marginally up at 1.9589.

• The US economy suffered a minor setback yesterday after data was released revealing worse-than-expected core durable goods orders for July, which dulled investors risk appetite and hurt the higher risk currency.
  
• Additionally, the data encouraged investors to lock in profits made in aussie-denominated assets held last week, which allowed the pound to recover some of its losses.
  
• A fall of 1.5% in the Nikkei 225 index further hindered the Australian dollar due to the commodity driven nature of the currency.
  
• This morning however, the aussie recouped its value after a surprising jump in business investment last quarter suggested the economy is growing faster than expected, underpinning hopes for a rate hike later this year.

Greenback recovers early losses as risk erodes

Early gains for the single currency, following the positive Ifo survey, were swiftly recovered by the greenback to close the day at 1.4255.

• The euro initially hit the day’s high of 1.4351 against the dollar, after the German Ifo business survey notched up its strongest monthly gain since 1996.
  
• But these gains were swiftly erased as details of a US durable goods report for July were less upbeat than expected, eroding risk appetite in the market and sending investors running to the relative safety of the US dollar.
  
• As a key measure of business demand, the weak durable goods data reminded investors that the US economy still faces huge challenges as it tries to emerge from deep recession.
  
• The single currency was also hampered by a poor day’s trading in the European equity markets which, even after a late rally, saw both the FTSE and the DAX closing over half a percent down.
  
• This currency pairing is trading at a steady level this morning, as the markets wait for crucial economic data to emerge from the US later today.

Sterling slides further vs dollar

Sterling fell by nearly two cents, or 1.2%, at its lowest point yesterday as poor economic data from the US encouraged investors to dump the pound.

• A survey of new purchase orders for durable goods in the US revealed a figure slightly down on forecasts, dulling investors’ appetite for sterling as they retreated to the safer currency.
  
• This data was immediately levelled out by a stronger-than-forecast US homes sales figure, but it had a minimal selling effect on the dollar, with the pound eventually closing the day down at 1.6233.
  
• The pound also suffered from a slowdown in the recent bullish trend of European equities, with the FTSE100 ending up 0.54% down for the day, putting selling pressure on sterling.
  
• In trading so far this morning, the pound has slowed its rate of decline following stronger-than-forecast data emerging for UK house prices.
  
• Investors will be keenly anticipating the US Prelim quarterly GDP figure announced today at 13:30BST, with forecasters still predicting an economic retraction of 1.4% despite recent upbeat sentiment about US recovery.

Sterling continues longest decline vs euro since January

Another fall for sterling yesterday puts it into its longest decline against the single currency since January.

• The euro continued to advance yesterday following a stronger-than-forecast German Ifo business morale survey, which reinforced signs that Europe’s largest economy is recovering from recession.
  
• The pound also suffered as the yield on two-year government bonds fell to a record low, making short-term British debt less attractive than its eurozone counterpart.
  
• One analyst said yesterday that with BoE so cautious about keeping rates low and the Ifo so positive, it is hard for euro/sterling not to be pushed higher.
  
• Despite the pummelling that sterling has taken this month, some market participants said that the currency may be in for a correction next month, when many traders return from holidays and more economic data reflects improvements in the UK economy.
  
• A positive CBI retail sales figure, announced today at 11:00BST, could help to slow the pound’s decline, whilst in the eurozone investors will be listening in to the preliminary CPI figures from six German states, released throughout the day.