European stocks boosted the pound vs kiwi yesterday

The pound managed to recover nearly a cent, 0.4%, against the New Zealand dollar yesterday as investment demand returned to the UK currency.

• Data showed that in July, production rose by 0.9%, which fuelled a wave of optimism about UK economic recovery.
  
• Bolstering the optimism was a forecast from the National Institute of Economic and Social Research which estimated that GDP rose in the third quarter by 0.2%, which, if correct, would suggest that the UK is out of recession.
  
• Sterling also received a boost from European stocks which continued their strong run.
  
• Trading this morning has seen the pound make further inroads into last week’s losses against the kiwi, currently up around 0.4%.
  
• The current strength of the kiwi will have investors around the world focused on the rate decision and corresponding statement released by the Reserve Bank of New Zealand at 22:00BST today, which could have a significant impact on the currency.

Sterling reversed slide against aussie, as UK economic recovery hopes were renewed

The pound capped its four-day slide against the aussie yesterday, buoyed by renewed support for the UK’s economic recovery.

• Following from positive services figures last week, the UK economy was given another boost as a manufacturing production reading came in higher-than-expected at 0.9%.
  
• Additionally, European stocks also continued to show strength, with the FTSE100 briefly pushing past 4950, which supported sterling’s rally.
  
• In Australia, figures yesterday showed that business confidence hit a 6-year high in August, adding to mounting speculation that local rates could rise in coming months.
  
• However, this data, which drove the aussie forward against the dollar, was unable to impact on sterling which repealed some of its recent losses to trade up 0.2%.
  
• The Australian economy suffered a setback this morning as retail figures for July were down on the previous month, which has put pressure on the aussie, allowing sterling to rise 0.5% in trading so far today.

Selling pressure was mounted on the dolla yesterday, with gold reaching $1000

The euro rallied strongly against a broadly weakened dollar yesterday, briefly reaching a yearly high of 1.4523 at 15:30BST before closing at 1.4474.

• The single currency gained almost exactly 1.00% yesterday, as rising risk sentiment, supported by strong equity markets, continued to put selling pressure on the greenback.
  
• The dollar suffered from a rise in gold prices, which reached its highest level since March 2008, as well as fresh concerns over its status as a reserve currency, with analysts suggesting that dollar selling pressure could continue over the short term as risk sentiment strengthens.
  
• The single currency was given further strength in the afternoon as the US markets opened up positive, encouraging investors to sell the safer currency.
  
• In trading this morning, the euro has continued to trade near its 2009 high, as investors continue to sell the low-yielding dollar in favour of riskier assets.
  
• Investors will be listening to the words of the Chicago Fed President, who speaks today at 13:00BST, for clues to the pace of US economic recovery, whilst in the eurozone, there are no major announcements.

The pound posted strong gains against the US dollar yesterday as risk aversion eased

The pound reached a two-week high against the dollar yesterday, building on gains made last week, to close the day up 0.8% at $1.6486.

• The pound made strong gains against the greenback yesterday, finding support from stock markets which rose on speculation that the global recession is easing, sapping demand for the currency haven.
  
• Sterling found further support from July’s manufacturing production figure, which at 0.9% was a good improvement from the 0.4% reading in June and helped to bolster demand for the currency.
  
• Additionally, traders cited gold’s rally above $1000 per ounce as a source of broad downward pressure on the US currency.
  
• These cumulative effects allowed the pound to briefly climb over two cents, to a high of 1.6558, as investors bought back in to the UK recovery.
  
• The pound has continued to rally again this morning, breaking above the 1.6500 resistance level, as risk sentiment remains high.

Early gains for the pound vs euro yesterday were lost as equities receeded from their highs

Having made early gains against the single currency, the pound stumbled in later trading, to close the day marginally below the 1.14 level.

• Sterling initially reversed Monday’s losses, recovering to 1.1451 as data revealed that manufacturing output rose at its fastest rate in one and a half years in July, which encouraged investment demand.
  
• The improved reading of 0.9%, which was three times what had been forecast, was helped largely by a sharp rise in car production which rose by 10.4% in July from June.
  
• The figures suggest that the UK economy has made a stronger start to the third quarter and may be on track to emerge from recession sooner than previously predicted.
  
• However, in the afternoon the pound was unable to capitalize on its early gains as the rally in equities appeared to favour euro investment, allowing the single currency to regain its value.
  
• Trading this morning has seen the pound edge lower as the European stock markets start trading in the red.
  
• The pound may be able to hold its value today if UK trade balance figures, released at 09:30BST, follow forecasts and show improvement in July.