Caxton FX Currency Blog: 09/03/09

Thursday 3 September 2009

The pound continued to post strong gains against the New Zealand currency yesterday, regaining another 1.0% to close at 2.4157.

Equity markets continued to trade in the red yesterday which put selling pressure on “riskier” assets, driving the kiwi lower.
Additionally, data in the US revealed that job losses were still high, far more than had been expected, with the ADP non-farm employment change producing a figure of 298K for August, which further hindered the kiwi’s progress.
In the UK, an improved figure for conditions in the construction industry brought relief from a string of negative economic data, encouraging demand for the pound.
However this morning sterling has started to relinquish its gains part due to a rebound in Chinese shares that eased aversion to riskier, higher-yielding currencies.

The Australian dollar started to reclaim its losses yesterday following a positive second quarter GDP figure.

Demand increased for the aussie yesterday following a better-than-forecast 0.6% quarterly growth rate which buoyed investor sentiment as it suggested that interest rates could still rise later this year.
However, the aussie’s gains were capped after US stocks fell for the fourth day, with the pound closing down just half a cent at 1.9506.
In trading this morning the pound has continued to lose ground with investors seemingly unnerved by Australia’s worse-than-expected trade balance figure, which was a full billion dollars further in the red in August than in July.
The riskier aussie dollar was also supported by a rally in Chinese equities during eastern trading, with the Shanghai Composite closing up nearly 4.0%, which encouraged investor demand.

The single currency rallied against the greenback yesterday to close the day up 0.3% at 1.4262.

An overall chill in risk demand kept the euro near a two-week low against the dollar yesterday morning, with figures confirming a 0.1% quarterly contraction in the eurozone going relatively unnoticed in early trading.
In the afternoon however, data emerged revealing a decrease in US crude oil inventories, raising the price of oil and putting selling pressure on the dollar.
Additionally, the US saw tentatively positive data from factory orders and non-farm productivity, but analysts maintained that nervousness amongst traders prevented the euro from achieving stronger gains.
In trading this morning, the single currency has continued to rise as European equity markets open marginally higher.
The ECB will be releasing their latest interest rate decision at 12:45BST today which is widely forecast to remain at 1.00%, whilst in the US there are unemployment claimant figures due at 13:30BST.

Sterling posted gains of over a cent against the greenback yesterday as rising oil prices weakened the dollar.

Data showed that the level of US crude oil inventories fell last week, which weakened the dollar as prices rose, enabling the pound to regain losses made on Tuesday.
Additionally, the pound traded strongly on the back of improved construction sector data despite weaker global equities, which remained under pressure yesterday as concern lingered that the summer rally on world stock markets had proceeded too quickly.
Sterling strengthened further in the afternoon, having hit a 1.6115 intra-week low early on, as the US non-farm productivity revised figure posted the largest increase since 2003.
The 6.6% reading was revised up from 6.4% encouraging investors to leave the safety of the dollar, to close the day at 1.6258.
In trading so far this morning, the pound has continued to gain, already surpassing the 1.63 mark.
In the US today, forecasters are predicting a slight reduction in employment claims, with data being released at 13:30BST. US non-manufacturing PMI are also released at 15:00BST.

Sterling rebounded yesterday following improved construction industry data, closing the day up 0.35% at 1.1398.

Sterling rose yesterday, clawing back from recent losses and hitting a week-high of 1.1427 against the euro as investors covered short positions in the pound following its broad slide in past weeks.
Additionally, a positive UK construction industry figure gave relief from a string of poor data emerging from the economy and helped the pound move further away from recent 10-week lows.
The reading of 47.7 for August was improved from last month but still below the predicted level of 48.1.
In trading this morning, the pound has continued to make marginal gains against the single currency, consolidating its position above the 1.14 mark.
In the UK today data is released at 9:30BST on the services industry which is forecast to continue expanding for the fourth consecutive month, whilst in the eurozone, the ECB is releasing their interest rate decision at 12:45BST.