The kiwi continues to climb vs sterling following strong retail sales data in NZ

The pound edged lower against the kiwi dollar yesterday as investors continued to shift their funds into high-yielding currencies, with the pair closing at 2.1542.

• Commodity and equity markets rallied higher yesterday, including a rise of nearly a percent in the Nikkei 225 and the Shanghai Composite, which maintained strong demand for the kiwi.
  
• Selling pressure on the pound also remained high following a report that cast doubts over the pace of the UK economic recovery, stating that interest rate rises would lag those of other major economies.
  
• In trading this morning, the pound has shed a further two cents against the kiwi following a surprise jump in New Zealand retail sales for August.
  
• Sales rose 1.1% from the previous month, beating expectations of a rise of 0.6% and fuelling talk that the central bank might soon drop its economic easing measures.

Strong commodity prices and doubts over the UK economy allow the aussie to gain further ground

The Australian dollar continued to push higher yesterday, advancing over a cent as sentiment towards the higher-yielding currency remained positive.

• Commodity currencies, such as the aussie, made progress yesterday in line with stronger prices for oil and metals.
  
• Rallying global equity and commodity markets encouraged the rise in risk appetite in the market, which heightened demand for the aussie dollar.
  
• In the UK, the market still holds the view that further quantitative easing could be announced in November, which has put substantial pressure on the UK currency as other major economies look to wind up stimulus measures.
  
• In trading this morning, the pound has halted its steep decline, with the price currently flat as a weaker-than-expected business confidence survey stemmed demand for aussie assets.

Euro posts gains against the US dollar as risk appetite ushers investors into high-yielding currencies

The single currency recovered some of the losses it incurred on Friday, gaining over half a cent against the greenback as risk appetite in the market strengthened.

• Rallying equities yesterday, which have been boosted by stronger commodity prices and optimism about the US corporate earnings season, also buoyed support for the euro, allowing it to briefly trade over 1.48.
  
• Analysts also noted that while in other nations future policy remains hazy, the single currency benefited from a clearer outlook for monetary policy in the eurozone.
  
• Additionally, comments from the president of the St Louis Federal Reserve that the US economy faced risks from rising inflation, stoked speculation that US interest rates might rise sooner than had been expected, but investors remained bold in their exposure to risk, continuing to sell the dollar.
  
• This morning, the pairing is trading relatively steadily around yesterday’s closing price, although the euro is likely to find support from a German economic sentiment survey, released today at 10:00BST.
  
• In the US, investors await figures on the Federal Budget Balance, however the exact time of the release is unknown.

Sterling loses further ground to the dollar on specualtion of a further extension of QE

Traders continued to sell sterling yesterday, pushing the UK currency down to a five-month low against the dollar, eventually closing at 1.5797.

• The pound lost ground after an economics and business report forecast that sterling could fall as low as $1.40 against the dollar.
  
• The report found that interest rates in the UK were likely to remain at record lows for some time and would remain at just 2.0% until 2014, which would put the country’s yield well behind other major economies.
  
• Traders also continued to speculate that the Bank of England might increase the value of its quantitative easing policy beyond the current £175bn, in stark contrast to the prospect of similar special stimulus measures being wound down in other economies.
  
• In trading this morning sterling has edged lower, as investors await details of the UK’s inflation rate, which is predicted to fall to 1.3%. Should the rate fall below 1.0%, the governor of the BoE, Mervyn King, must write a letter explaining the fall, though the time of this release is undisclosed.

Sterling slides further in the wake of a damning UK economic report

The pound maintained its downward trend yesterday, losing a further 0.6% as a British report cast doubts over UK recovery prospects.

• The outlook for global monetary policy shaped action on the foreign exchange markets on Monday, with sterling the main casualty.
  
• A report from the Centre for Economics and Business Research predicted that UK interest rates would remain at their historic low of 0.5% through 2010. The report also forecast they would stay below 2% until 2014.
  
• That would be likely to leave sterling the lowest-yielding major currency at a time when interest rates outside the UK look set to start rising, which added selling pressure to the fragile pound.
  
• In trading this morning, the UK currency has continued to lose ground, with a positive housing price survey failing to buoy demand.
  
• Sterling may find some support today should the Consumer Price Index reveal a slightly higher inflation rate at 09:30BST. Gains may be short lived however, with forecasts predicting an upbeat German economic sentiment survey, figures of which are released at 10:00BST.