The kiwi dollar continues to climb as expectations of a rate rise strenghten

Once again sterling edged downward against the kiwi yesterday, though it picked itself up significantly from an intra-day low below 2.13, to close at 2.1534.

• The pound dropped in early trading after a business group said the Bank of England should expand its asset-purchase programme and the inflation rate slowed more than forecast.
  
• UK annual consumer price inflation slumped to its weakest rate in seven years in September, underlining the likelihood that the Bank of England will need to maintain loose policy for an extended period.
  
• However, investors took the opportunity to cash in profits in the afternoon, buying back into the pound, enabling the sterling price to rally.
  
• In trading this morning, the kiwi has resumed its climb, with figures pointing to a continued recovery in the NZ housing market, which bolstered expectations of rate rises early next year.

The aussie stumbled yesterday, enabling the pound to gain as investors took profits

The pound reversed a three-day slide against the aussie, posting gains of nearly a cent as investors took an opportunity to lock in profits.

• During the morning session, the pound continued to push multi-year lows, hitting a price of 1.7333, as weak inflation data reinforced concerns over the strength of the UK economic recovery.
  
• UK consumer prices fell to a five-year low of 1.1% in September, dipping below the market’s estimate of 1.3%, due in part to lower utility bills and food prices.
  
• In addition, demand for the aussie remained strong as traders continued to favour gold over the US dollar, pushing the price to an all-time high.
  
• However, the pound made a comeback in later trading, rallying nearly two cents off record lows, as investors booked in profits.
  
• The pound was also supported by some upbeat comments from the BoE Deputy Governor, who stated that earlier fears of UK recovery were unfounded.

The single currency is pushing up towards 1.49 against the dollar as risk appetite firms

The single currency reached a 14-month high of 1.4874 against the greenback yesterday, advancing over a cent, as investors refocused on the outlook for US interest rates.

• In early trading, the single currency suffered a setback as the German ZEW Economic Sentiment index dropped to 56.0 from 57.7 in September, its first fall in three months.
  
• However, the dip provided a good buying opportunity for a market that remains broadly bearish on the dollar, allowing the euro to push higher.
  
• Analysts also noted that the weakness of the dollar was due in part to comments from a Japanese Ministry of Finance official, which reiterated the recent stance to accept the onging strength of the yen.
  
• In addition, the dollar was trading lower on the back of a surge in commodities, with gold rising to post an all time high of $1,065/oz, extending its rally from $984/oz on October 2nd .
  
• The single currency has continued to advance this morning, briefly posting as high as 1.49, though trading today could be light ahead of the FOMC minutes released today at 19:00BST.

The pound/US dollar price is slowly rising as investors broadly sell the greenback

Having made early losses, the pound recovered ground in afternoon trading following positive comments from the BoE Deputy Governor, Charles Bean.

• The pound initially fell against the dollar after consumer prices last month rose 1.1%, down from 1.6% in August according to the Office for National Statistics, which was below the 1.3% prediction.
  
• Prime Minister Gordon Brown also said that government had to ensure that the recovery is not going to be derailed, suggesting that stimulus measures would not be removed anytime soon.
  
• However, in the afternoon, the pound rebounded strongly, following the words of Deputy Governor Bean who stated in a speech that the British economy has hit rock bottom and the worst fears of earlier in the year are unfounded.
  
• In addition there was a substantial return to dollar selling in the market, spurred by persistent expectations for low US interest rates, and investor appetite for high-yielding currencies.
  
• Sterling has continued to edge upwards in trading this morning, though unemployment data, which is released at 09:30BST and is forecast to reveal a higher claimant count, could hamper demand.

Sterling picked up from early lows to post marginal gains against the euro yesterday

The pound reversed its three-day slide against the euro as a surprise dip in a German economic sentiment index offset weak UK inflation data.

• In early trading, sterling was undermined by a declining inflation rate, which prompted further speculation that interest rates could be on hold at 0.5% until 2011 and sent the UK currency to a six-month low of 1.0628.
  
• The Consumer Prices Index (CPI) dropped to an annual rate of 1.1% in September from 1.6% in August. Meanwhile, the Retail Prices Index (RPI) inflation measure, which includes mortgage interest payments and housing costs, fell, to -1.4% from -1.3%.
  
• However, the pound rebounded strongly after the “positive signs” in the eurozone began to fade, with the German ZEW measure of investor sentiment unexpectedly falling after three months of gains.
  
• Additionally, the pound was given slight support in the afternoon after the BoE Deputy Governor spoke more positively about the UK recovery, subduing rising concerns over the health of the economy.
  
• Investors took the opportunity to lock in profits, allowing the pound to rally up from session lows to close up at 1.0718.