Bearish sentiment towards the pound on Friday allowed the kiwi to make substantial gains

The kiwi dollar climbed another 1.2% on Friday, as demand for the high yield currency remained strong in the wake of positive economic data.

• Investors continued to move their funds into the riskier currency on Friday as data in the US revealed a strengthening economic recovery.
  
• Selling pressure on the pound was also high on Friday as comments from the BoE revealed their willingness to see the currency remain weak, undermining investor confidence.
  
• The kiwi also received support from a slight rise in oil prices. The New Zealand dollar tends to fair well when commodity prices are on the up owing to the nature of the economy.
  
• The kiwi has retreated in trading this morning though as investors turned away from riskier assets following hefty losses in the stock markets.
  
• Stocks turned sharply lower on fears over the strength of the economic recovery and concerns that markets had reached their peaks, which has enabled the pound to recover around 0.1% so far today.

The pound has reversed recent losses against the aussie, supported by rising risk aversion

The pound lost another 1.0% to the aussie dollar on Friday to close at 1.8373, as selling pressure remained strong.

• The aussie dollar reached a twenty-four year high against the pound on Friday, as King’s comments continued to weigh heavily on the pound.
  
• On Thursday, the BoE governor made it clear that he was not too concerned about the current weakness of the pound, and that he was in fact in support of its current value in order encourage a rebalance towards an export led economy.
  
• The news reaffirmed that interest rates would remain low for some time, which encouraged investors to sell the pound in favour of the high-yielding aussie.
  
• In trading this morning however, the aussie has capped its gains as weaker Asian stocks, soften demand for the Australian currency.
  
• Rising risk aversion has also sent the price of gold back below $1000 per ounce, which has put further pressure on the aussie, with pair currently trading steadily around Friday’s closing price.

The euro made ground against the dollar on Friday, but has relinquished its gains this morning

The euro made gains on Friday, following a two day slide, buoyed by improving economic data in the US, and closing at 1.4689.

• The single currency initially lost ground against the greenback as poor data on US core durable goods orders initiated a slight dollar rally.
  
• However, the euro erased early losses after data showed US consumer sentiment improved in September while sales of US homes edged higher in August.
  
• Consumer sentiment rose to its highest point since February 2008, supporting a rise in stock indices, which picked up from earlier losses, adding further support to the euro’s rise.
  
• Additionally, a G20 statement suggested that they aim to continue to provide support for the global economy, which put further selling pressure on the dollar.
  
• In trading this morning though, the single currency has lost nearly 0.5%, dropping back to around 1.4620 following a rise in risk aversion spurred by the Asian markets.

The pound fell below $1.60 on Friday, and rising risk aversion has seen it tumble further this morning

Confidence in the UK currency remained weak on Friday in the wake of comments made by Mr King and the BoE, with the price sinking below $1.60.

• Having initially fallen to a four month low of 1.5921 in the early hours of Friday morning, the pound proceeded to consolidate above 1.60, with analysts suggesting that a bullish correction was expected in the wake of Thursday’s plunge.
  
• However, bearish sentiment towards the pound soon returned, with traders continuing to dump the British currency on perceptions that the BoE would lag other countries in tightening its loose monetary policies.
  
• In the afternoon, a worse-than-expected reading in U.S. durable goods orders triggered a risk aversion rally, which also helped to send the pound back down near its intra-day low.
  
• Additionally, analysts noted that the pound’s slide led Japanese retail traders to liquidate sterling/yen long positions, adding further selling pressure.
  
• In trading this morning, the pound is down half a cent as a rise in risk aversion is spurred by weaker stock trading in the Asian markets.

Sterling continued to slide vs the euro on the run up to the weekend, but has capped its losses this morning

Sterling fell yet further on Friday on perceptions that the UK currency would be allowed to weaken to help the fragile British economy.

• The pound dropped to a fresh five-month low against the euro on Friday as traders continued to sell sterling following comments from Mervyn King that sterling’s fall was helpful in rebalancing the UK economy.
  
• Some analysts have suggested that these comments which have undermined the UK currency, have become a new policy tool with which the central bank can kick-start the economy.
  
• Pressure on the pound was also stemming from the UK’s budget deficit and continued speculation that the BoE might yet loosen monetary policy further.
  
• In trading this morning, slight profit taking has seen the pound cap its losses, with the pair currently trading around 0.15% up for the day.
  
• Market players say that the outlook for sterling does remain bearish though, and it is set to remain the weakest of the major currencies for some time.