The kiwi was weaker in trading yesterday following some concerning US economic data

The pound made gains yesterday, taking support from a revised IMF report and an easing of risk activity to close the day at 2.2316 up 0.7%.

• Rising risk aversion enabled the pound to advance over a cent against the kiwi yesterday, with investors retreating into haven currencies.
  
• US employment claims rose last week, posting a figure well above forecast, dulling hopes of a swift recovery in the US, but supported gains for the UK currency.
  
• The negative data led to a sharp retreat in equity markets which prompted investors to sell the higher-yielding currencies.
  
• Additionally, the International Monetary Fund revised their UK growth prediction next year to 0.9% from 0.2%, which boosted confidence in the UK economy.
  
• This morning, sterling has slipped back slightly, currently trading marginally below the 2.23 level ahead of US non-farms payrolls data.

Weak US data sapped demand for the aussie yesterday, enabling the pound to gain

The pound rebounded strongly yesterday, gaining over two cents, or 1.3%, as a sharp rise in risk aversion in the market, dulled demand for the ‘riskier’ currency.

• Both unemployment claims in the US and manufacturing data posted worse-than-expected figures, raising slight concerns over the rate of recovery in the world’s largest economy, and weakening demand for the higher yielding aussie.
  
• The negative US data was reflected in global stocks, which also took a steep downturn, with major indices loosing around two percent, which further reduced dollar selling, enabling the GBP/AUD price to rise.
  
• Analysts also noted that the aussie fell prey to light profit taking with investors concerned over speculation that countries are unhappy with the current weakness in the dollar.
  
• In trading this morning, the pound has edged down around 0.2% as investors avoid taking any long positions ahead of important US employment data later this afternoon.

The euro slid sharply against the dollar yesterday, weighed down by a rise in risk aversion

The dollar rallied against the single currency yesterday after a run of disappointing manufacturing data left investors unwilling to take on risk.

• The single currency took a sharp downward turn, weighed down by comments from a top European official who expressed concern about the value of the euro.
  
• He said that European finance ministers would discuss the single currency’s recent appreciation at the G7 meeting this weekend.
  
• Waning risk appetite amid a mixed batch of US economic data also prompted investors to seek the perceived safety of the greenback.
  
• Data yesterday showed US initial jobless claims rose in the latest week, a reminder that the labour market is far from stable.
  
• Additionally, data showed that the eurozone unemployment rate rose to a ten year high of 9.6%, which undermined demand for the currency, bringing it to a two week low of 1.4527.

An easing of risk appetite has strengthened the dollar

A broadly stronger pound eventually relinquished its gains against the dollar yesterday, to close the day down 0.15% at $1.5955.

• The British currency initially edged higher after the IMF said that UK gross domestic product will expand 0.9 percent next year, from a July prediction of 0.2 percent, as the housing market slump eases and exports increase.
  
• However, the pound fell back in the afternoon, weighed down on speculation that money authorities would express some form of support for the US currency at the G7 meeting.
  
• Additionally data showed that the UK manufacturing PMI unexpectedly fell in September for the second consecutive month, which hampered sterling’s progress.
  
• In the US, both unemployment claims and manufacturing data posted below forecasts, which eased risk appetite and pulled the pound back below the 1.60 resistance level.
  
• The dollar is trading higher today as investors take up defensive positions as they await US non-farm employment data released at 13:30BST, which will give the market short-term direction.

Pound advanced against a broadly weaker euro yesterday, but has stumbled in trading this morning

Sterling climbed half a cent against the single currency yesterday, helped by a weaker euro, which was undermined by comments from an EU official.

• In early trading, the pound was able to brush off an unexpected fall in the UK Manufacturing industry, which contracted to 49.5 in September, from 49.7 in August, against the market expectations of an increase to 50.3.
  
• The pound then gained against a broadly weakened single currency as European officials expressed discomfort over the euro’s recent rise in value.
  
• A top European official announced that he would discuss the EU’s concern over the recent appreciation of the euro at the G7 meeting this weekend.
  
• The single currency was further undermined as data revealed a rise in eurozone unemployment to a ten year high of 9.6%, which raised concerns over the health of the economic recovery in the region.
  
• A Nationwide housing survey has revealed that UK house prices rose by 0.9% in September compared with August, the fifth consecutive monthly increase, but the data has gone relatively unnoticed with pound currently down in morning trading.