Sterling plunges following King's statement

Sterling has taken a steep downward turn today following the words of BoE governor Mervyn King who said that the central bank was considering reducing the interest rate in order to provide a disincentive for banks to hoard cash with the central bank, encouraging them to lend. King expressed concern that credit was still not readily available to the consumer and that reducing the lending rate was “something we’re looking at.” This also raised concerns that BoE’s quantitative easing program may not yet be finished, given that more money may have to be injected if the banks continue to refrain from lending. The pound has fallen to a near four month low against the euro of 1.1278 and by two cents from its intra-day high against the dollar, as selling pressure mounts on the UK currency.

The pound has built on yesterday's gains following positive inflation data released this morning

Yesterday the pound recovered losses incurred at the end of last week, as the kiwi was stung by a market movement away from higher risk currencies.

• The pound reversed its downward slide, gaining nearly a cent (0.4%) as demand for the kiwi was significantly dulled by the easing of risk appetite.
  
• A trade dispute between the US and China, although not severe, was enough for investors to question whether they had oversold haven currencies, weakening the kiwi.
  
• The New Zealand dollar also continued to be held back by an unexpected fall in retail sales which weakened claims of an early rate rise.
  
• In trading this morning the pound has slowed its gains, currently trading marginally above yesterday’s closing price.
  
• With little significant data out in New Zealand to move the currency, investors will be focusing closely on figures released in the US today, as well as a speech by Fed chairmen Bernanke, for clues to current economic health and possible risk strategy.

Weak equities hurt the pound yesterday, but it has recovered against the aussie today following the words of the RBA

Having made strong early gains, the pound steadily lost value against the aussie throughout the day, eventually closing down at 1.9221.

• The pound was pushed down yesterday as the FTSE fell back below 5000 points, quelling demand for the UK currency.
  
• Although the stock markets rallied in the afternoon, illustrating that investors were willing to look past a trade dispute between the US and China and take on more risk, the pound failed to cap its losses.
  
• The Australian dollar has dipped this morning after minutes of the Reserve Bank of Australia’s last policy meeting gave little guidance to markets on when the interest rate would be raised.
  
• The RBA stated that before it could raise cash rates, it needed further evidence that the nascent recovery, both at home and abroad, could be sustained in coming months.
  
• Currently the pound is trading up near the 1.93 level again, as selling pressure mounts on the aussie.

The single currency made gains against the greenback yesterday, though is down marginally so far today

After sliding against the greenback yesterday morning, the single currency recovered to close the day up 0.3% at 1.4615.

• In early trading, the single currency relinquished its gains to a broadly stronger dollar as falling global stocks spurred profit taking and the US and China became embroiled in a trade related dispute.
  
• President Obama announced tariffs on certain Chinese imports over the weekend which acted as a catalyst for a dollar rebound, but analysts said that the move was unlikely to lead to a trade war, with the rebound itself proving relatively muted.
  
• Indeed just before the US markets opened, the single currency jumped up over half a cent in less than half an hour posting a nine-month high of 1.4650, with analysts expecting it to continue pushing higher.
  
• The pairing are trading steadily this morning around yesterday’s closing price as investors remain cautious of taking bold positions ahead of important US data due later today.
  
• Improved data on US retail sales and the Empire State manufacturing index, both released today at 13:30BST, could help return risk sentiment to the market, driving the dollar lower.

Sterling has begun to recover yesterday's losses as risk appetite returns to the market

Risk activity eased off yesterday in the wake of falling stocks and a trade dispute between the US and China, quelling demand for the pound.

• Sterling retreated from one-week highs hit against the greenback as weaker equity markets spurred profit taking in riskier currencies and as investors braced for a raft of UK economic data later this week.
  
• UK shares initially slipped 0.7%, while European major indices fell a percent, cutting demand for currencies considered to be higher-risk.
  
• A trading row between China and the US also dented risk activities, though analysts say that this is unlikely to put a lasting hole in the market’s appetite in the longer term.
  
• Equities rallied slightly in the afternoon as the US markets came online, enabling the pound to recover some of its losses, and closing down at $1.6582.
  
• Inflation figures in the UK have just been released, and are better than expected, which should support demand for the pound as the economy appears to be recovering.

Having slid against the euro yesterday, the pound is recovering to nearer 1.14 so far today

Sterling neared one-month lows yesterday, losing 0.75% against the single currency to close down at 1.1342.

• The eurozone was given a real boost after the European Commission predicted that the EU would return to growth in the third quarter, supporting demand for the currency.
  
• Additionally, investment demand in the pound was sapped as global equities, which have been influential in the pound’s direction in recent weeks, traded deeply in the red.
  
• Sterling also suffered as concern for the economic environment was rekindled following a report showing a negative credit outlook for UK banks over the next 12-18 months.
  
• In trading this morning though, the pound has begun to recover its losses, currently trading around 0.3% up for day, following data that revealed British house prices rose for the first time in more than two years.
  
• The German ZEW committee releases data on economic sentiment today at 10:00BST, and is forecast to produce an improved reading which will support demand for the euro.