The kiwi dollar has risen sharply following a positive business survey and the RBA rate increase

The kiwi dollar posted a 2.1% gain, a movement of four and half cents, against the pound yesterday in the wake of a strong business confidence survey.

• During European trading hours the kiwi gained steadily, supported by speculation that Australia would raise their interest rate level.
  
• The kiwi was also buoyed by rising risk appetite as global stocks held up despite a weak US employment report on Friday.
  
• In late evening though, the kiwi received a solid boost after the respected NZIER survey revealed the first optimistic figure since the fourth quarter of 2006, triggering investor demand for the New Zealand currency.
  
• In trading this morning the kiwi has continued to gain following the decision of the RBA to move their interest rates up to 3.25%, with the sterling/NZD price nearing a 20-year low.
  
• However, the kiwi has trimmed its gains, currently trading just 0.1% up on the day, as New Zealand officials highlight the difference between their economy and their neighbour’s.

A rise in aussie interest rates broadly strengthens the Australian currency

Speculation over an imminent rate rise in Australia sent the pound tumbling yesterday, losing 1.5% to close at 1.8146.

• The Australian dollar advanced strongly as expectations grew that the Reserve Bank of Australia would move to raise interest rates at its policy meeting.
  
• Forecasters were split evenly over whether the Reserve Bank of Australia would keep rates on hold in their meeting tomorrow or wait until November or December to raise rates by 0.25 basis points.
  
• Expectations were given a further lift as figures yesterday showed that Australian job advertisements last month rose at their fastest pace since late 2007, fuelling optimism over the country’s recovery.
  
• This morning, the bullish speculators were proved correct as the Reserve Bank did indeed raise the official cash rate from a 49-year low to 3.25%, up 25 basis points.
  
• The move makes Australia the first G20 nation to raise their rates following a prolonged period of positive economic activity, and the pair are currently hovering marginally above 1.80.

The euro has made strong gains against the dollar, buoyed by a rise in risk and pressure on the US currency

The euro posted solid gains against the greenback yesterday, as positive US data buoyed demand for the ‘riskier’ single currency.

• The dollar remained weaker against the euro in trading, continuing its decline after last week's weaker-than-expected US data failed to extinguish risk appetite
  
• The dollar was also lower as traders read the absence of any new commitment on currencies from the G7 meeting over the weekend as a green light to sell the US currency.
  
• Traders were bracing for stronger language to arrest the slump in the US currency but no mention of dollar weakness was made, allowing the greenback’s downward trend to continue.
  
• The single currency also found support following a better-than-expected US Non-manufacturing PMI figure for September, which allayed concerns over the health of the US recovery.
  
• In trading this morning the dollar has fallen sharply after a British newspaper said that Gulf Arab states were in secret talks to end the use of dollars in oil trading. Currently the pair are trading back over 1.47, the highest price in nearly a fortnight.

Stong servies data and rallying equities were unable to buoy a weak pound yesterday, enabling the dollar to creep up

The pound continued to edge downward, undermined by speculation ahead of the MPC meeting later this week.

• Data revealed that Britain’s services sector grew more strongly than expected in September, expanding at its fastest rate for two years, quelling fears over the UK recovery following weak PMI data in the manufacturing and construction industries last week.
  
• However, the data failed to buoy confidence in the pound significantly with investors remaining wary of taking positions in UK assets ahead of the MPC statement this week.
  
• Additionally, business activity in the US non-manufacturing sector expanded in September, against market expectations of standstill, which supported dollar buying.
  
• The equity markets also rallied from lows at the end of last week, as confidence returned to the markets, however this was of little benefit to a burdened pound, with the pair closing relatively unchanged at 1.5934.
  
• The US currency has come under pressure this morning however, following speculation that the dollar may be dropped as the currency used in oil trades in the Gulf States, allowing the pound to make hesitant gains.

Selling pressure held firm on the pound yesterday, with the euro price falling below €1.08

The pound was unable to capitalise on improved services data, eventually losing over half a cent to a broadly stronger euro.

• The pound initially found some respite as positive data from the services sector bolstered expectations that the economy resumed growth in the third quarter.
  
• The purchasing managers’ index for the services sector showed a rise to 55.3 in September, showing improvement from last month and exceeding market expectations.
  
• However, sterling quickly relinquished its gains over expectations that the MPC meeting later this week will reaffirm that the UK monetary policy will remain comparatively loose for some time.
  
• Rallying global equity markets also benefitted euro strength, with the corresponding rise in risk appetite failing to buoy demand for the fragile UK currency.
  
• Pressure is likely to remain high on the pound today if data released at 09:30BST follows market expectations, and shows a month-on-month fall in UK manufacturing production.