RBNZ statement has limited impact on kiwi, with sterling easing off only slightly

Having gained nearly 2 cents in two days against the kiwi, the pound has struggled this morning in the wake of the RBNZ rate statement.

• Yesterday, strong European equities were enough to outweigh solid commodity prices allowing the pound to gain further ground against the New Zealand currency closing 0.5% up at 2.3790.
  
• The FTSE in particular epitomised the impressive rebound in stocks that we have seen recently, surpassing 5000 points and encouraging demand for sterling.
  
• This morning however, risk sentiment has supported the kiwi as investors see through the modest statement issued by the Reserve Bank of New Zealand that warned further rate cuts were possible.
  
• The rate held at 2.50% which came as no surprise, the statement itself though spoke of a patchy recovery and a high New Zealand dollar that could stand in the way of true recovery.
  
• Investors were not too phased however, realising that threats of a rate cut were not too credible in the face of their recent economic forecasts.
  
• The kiwi is now trading marginally higher for the day, as investors await the BoE’s statement.

Poor data has hindered the aussie's progress, allowing the pound to regain losses

Disappointing retail figures and rising monthly unemployment in Australia has allowed the pound to rally its recent sharp losses against the aussie.

• Firm gold and commodity prices prevented the pound from gaining significant ground against the aussie dollar yesterday after a surprising drop in retail sales in Australia in July had initially dimmed demand for the currency.
  
• The pound, however, was able to move 0.5 cents further from the 13-year low hit on Monday as European equities spurred demand for the currency.
  
• Sterling has continued to make gains in trading this morning after data from Australia revealed a surprisingly big rise in unemployment in August, which undermined expectations for a rise in interest rates in the near future.
  
• Demand for the aussie has cooled following the data, even though overall unemployment remained steady at 5.8%, with the pound moving up 0.3% in trading today.

Euro made further gains as selling pressure mounted on the dollar

The single currency continued to extend its yearly high against the greenback yesterday, briefly reaching 1.4600 as risk sentiment showed little sign of easing.

• The dollar continued to be broadly sold, extending its sharp falls from Tuesday, as global equities continued on their bullish run, blunting demand for haven currency.
  
• Selling pressure on the dollar was also compounded as the continuation of rising gold prices increased the metal’s appeal as an alternative investment, and as oil rose to over $72 a barrel.
  
• Some analysts have speculated however that this currency pairing could be in for an imminent correction downwards as they expect the euro is trading in the ‘over-bought’ territory. A continuation of bullish risk sentiment though could see the euro push higher.
  
• Data on the US trade balance is released today at 13:30BST, with forecasters predicting a slight increase in the deficit which may support a return to safer assets.

Strong equities pushed the pound higher vs the dollar

Sterling achieved a new two-week high against the dollar yesterday, supported by a continuation of bullish equities, eventually closing up at $1.6546.

• After an unsteady start, sterling managed to gain further substantial ground against the US dollar yesterday after rating’s agency Moody’s said Britain’s triple-A sovereign debt rating was “resilient,” adding further weight to the economic recovery.
  
• Early trading was relatively modest however with UK trade data, that showed the country’s trade deficit narrowed slightly in July, having little impact on the market.
  
• However, in the afternoon, risk sentiment was buoyed considerably as the FTSE100 reached 5000 points for the first time since October last year, with the pound briefly climbing to 1.6589.
  
• Additionally, analysts have noted that the high price of gold has encouraged investors to move into metals to hedge against declines in currencies, which has put broad selling pressure on the dollar.
  
• In trading this morning, the greenback has capped its losses, regaining around 0.2% in value, despite yet another strong opening in European stock markets.

Sterling continues to trade in the red against the euro

A rally in equity markets was unable to prevent the pound from sliding for the third consecutive day against the euro yesterday, closing down at 1.1365.

• In early trading yesterday the pound held steady against the single currency, with minor data going relatively unnoticed, as the upcoming BoE’s rate decision prevented any significant movement.
  
• However, strong European stocks were unable to rally the pound, working instead to the benefit of the euro, which edged up another 0.2%.
  
• The pound is trading marginally lower again today, as investors await the BoE’s interest rate decision announced at 12:00BST, which could have a significant impact on the markets, as investors are able to gauge the depth of the UK economic recovery.
  
• Certain analysts are saying that there is a chance that quantitative easing may be extended, a policy which the minutes from the last meeting revealed Mervyn King was in favour of, which would risk sending the pound into another downward spiral.