Positive data from NZ keeps the kiwi advancing against the pound

Following positive news in New Zealand, the kiwi climbed strongly yesterday but had its gains steadily pulled back after the release of the MPC minutes.

• It was revealed early yesterday morning that New Zealand had officially exited recession posting a third quarter positive GDP figure of 0.1%, which pulled the price to a low of 2.2433.
  
• The report raised expectations that the Reserve Bank of New Zealand would move to tighten monetary policy sooner than previously forecast.
  
• However, the kiwi had most of its gains steadily eroded throughout the day’s trading after the minutes from the latest UK MPC meeting revealed no discussion over reducing current interest rates, with the pair closing at 2.2696.
  
• In trading this morning, the kiwi has advanced further, currently trading up nearly a percent, as fresh data from New Zealand showed that domestic consumer confidence jumped to a four-year high in the third quarter.

The pound has failed to sustain yesterday's rally against the aussie, plummeting over 2 cents so far this morning

The pound shot higher against the aussie yesterday after suspicions were quashed that the Bank of England may have recently considered further easing.

• Minutes from the latest MPC meeting revealed a more encouraging note upon the prospect of the UK economy, and signaled that currently no further extension of loose monetary policies were necessary, which supported demand for the pound.
  
• Additionally, the rise of recent risk appetite took a brief pause as traders awaited an interest rate decision from the Fed, which weakened demand for higher-yielding currencies.
  
• However, during Asian trading, the Tokyo’s Nikkei index rose 0.9% in its first day of trading following a three day holiday, which encouraged investor demand for the aussie, pushing it higher, and currently trading 0.7% up for the day.
  
• The aussie was also supported by a US statement that rates would remain low for some time, which buoyed investors to resume selling the US dollar in favour of higher-yielding currencies.

The dollar reversed its slide yesterday, buoyed by stronger equities, but has fallen back today

Despite a reassertion that US interest rates would stay low, the dollar advanced over half a cent against the single currency yesterday as global stocks went into decline.

• During early European trading yesterday, the intense selling pressure on the dollar abated amid caution ahead of the Fed’s rate decision, with the pair holding around the 1.4800 level.
  
• In the evening, the statement from the Fed confirmed speculation that rates would remain low for an extended period of time, which sent the euro to a high of 1.4841.
  
• However, the greenback rebounded strongly, as traders remained cautious of betting aggressively against the US dollar following a sudden slide in US stocks.
  
• With rates set to stay at near zero for some time, analysts say that investors are likely to quickly return to funding carry trades in dollars, sending it lower once more.
  
• Indeed, the euro has made ground this morning following a business confidence survey in Germany that showed improvement from last month.

The dollar climbed yesterday and has continued to do so strongly in trading this morning

Having rallied strongly in the morning, the pound relinquished its gains as equities fell, with the pair closing marginally down at 1.6339.

• In European trading hours, the pound continued to advance after the Bank sounded a relatively bullish note on the economy, saying there had been a “number of developments during the month with positive implications.”
  
• There was also no sign that the Bank discussed cutting the interest rate it pays on commercial bank deposits in an effort to boost lending in the UK economy, which Mr. King had spoke of last week, adding downward pressure to the pound.
  
• However, the pound lost around 0.75% of its value in the evening as the surprise fall in equities quelled demand for riskier assets.
  
• Additionally, the Fed statement in the evening had sounded a more hawkish tone than some had expected, despite confirming that rates would remain at near zero for an “extended time,” which also cautioned traders against over selling the dollar.

Pound was supported yesterday by the MPC minutes but has resumed its slide so far today

Sterling got a welcome reprieve from negative sentiment yesterday after BoE minutes revealed that there had been no discussion of cutting interest rates.

• The pound rallied sharply after the minutes of the Bank of England’s September monetary policy committee meeting calmed fears over a possible extension of its quantitative easing programme.
  
• The minutes showed a unanimous consensus to keep the Bank’s asset purchase plan at current levels and there was no discussion over a cut in the rate its pays on commercial bank deposits.
  
• The tone of the meeting was more encouraging than had been priced into the market, stating that “ growth in the second half of the year is likely to be positive,” returning demand for the pound.
  
• However, although the minutes did mention recent improvements in the economic and financial data, they did leave the door open to further policy loosening, which capped sterling’s rally.
  
• In trading today, the pound has plummeted nearly a cent, hitting a low below the 1.10 mark as decling stocks and another statment from Mervyn King weigh heavily on the pound's prospects.