Pound is rallying against the kiwi dollar as investors book profits ahead of the weekend

The pound achieved a ten-day high against the kiwi yesterday, as bullish comments combined with profit taking to bring the UK currency off multi-month lows.

• The UK currency was buoyed by comments that quantitative easing is in fact having its desired effect and that the MPC may not need to extend QE in their next meeting as many has speculated they would.
  
• The news triggered a wave of profit taking, pushing the sterling/kiwi price up two and half cents on the day to close at 2.1849.
  
• There was positive news from the US yesterday in the form of corporate earnings, in particular, Goldman Sachs and Citigroup, but the rise in risk appetite failed to assist the higher-yielding currency as investors chose instead to lock in profits.
  
• The pound has extended its climb in trading this morning, currently edging back over 2.19 as investors continue to profits ahead of the weekend.

Sterling is currently trading higher against the aussie following upbeat comments and a move to cash profits

Sterling recovered some of its recent extensive losses against the aussie dollar yesterday, climbing over two cents, to close up at 1.7668.

• Bank of England member, Paul Fisher, said yesterday that policy makers would be more likely to pause asset purchases in their upcoming meeting in November, giving themselves the option of “doing more later,” rather than stopping them.
  
• His comments were taken to read that the MPC is unlikely to extend their quantitative easing programme, supporting a slight rise in confidence in the UK economy, strengthening the pound.
  
• In broad terms, the aussie traded strongly against most currencies yesterday as positive economic data in the US led to investors adding to their long positions in the higher-yielding currency.
  
• Indeed in trading this morning, the pound has halted its climb, with the pair currently holding around the overnight closing price, as enduring aussie strength offsets sterling’s rally.

Positive economic data supported euro gains vs the US dollar yesterday, but the price has pulled back this morning

The single currency pushed higher once again as the greenback suffered from rising appetite in the wake of positive economic signs.

• The dollar initially made after ECB President Trichet said that the US government and the Federal Reserve should pursue policies supporting a strong dollar and that excessive foreign-exchange volatility is an “enemy.”
  
• However the euro trimmed its losses in the afternoon following positive US data, which bolstered expectations that the economy is recovering.
  
• US jobless claims beat market forecasts dropping a further 10K week-on-week. The US CPI figure also rose marginally to 0.2%, supporting growing optimism over the economic recovery.
  
• The greenback also suffered after both Goldman Sachs and Citigroup reported better-than-expected earnings in the third quarter.
  
• Goldman Sachs posted a net income of $5.25 a share, compared with the average estimate of $4.18 a share, and profits for the period were $3.19bn, a four-fold increase from the same period in 2008.
  
• In trading this morning the euro has slipped back slightly but the price remains at near 14-month highs, hovering just above 1.49.

Broad dollar weakness and an increase in demand for sterling has pushed the price back near $1.63

Sterling achieved a three-week high of 1.6297 against the dollar yesterday, supported by upbeat comments about the UK economy.

• The pound jumped nearly three cents, or 1.8%, against the dollar on speculation that policy makers will pause their asset-purchase programme next month as the economy shows signs of recovering from the recession.
  
• The Financial Times cited Bank of England Markets Director Paul Fisher as saying that the asset purchases scheme may be paused to give the central bank the option “of doing more later.”
  
• Analysts suggested that it appeared that the Bank of England was letting it be known in more forceful terms that it is not talking the pound down any longer.
  
• Additionally, the pound benefited from broad dollar weakness as optimism about the global economy and buoyant earnings from Goldman Sachs and Citigroup encouraged investors to move into currencies seen as being higher risk.
  
• Data also revealed that US jobless claims dropped by another 10K week-on-week, and that the inflation figure increased to 0.2%, both of which beat market expectations, lessening demand for the haven currency.

Sterling has rallied strongly against the euro, pushing up over 1.09

Sterling strengthened as much as 2.2% to a ten-day high of 1.0936 against the euro yesterday, its biggest intra-day gain since Jan 30th.

• Sterling was able to post strong gains following bullish comments from a Bank of England policymaker who stated that quantitative easing is in fact working.
  
• MPC member Paul Fisher told the Financial Times he felt confident that the bank’s asset purchase programme was ‘having the scale and speed of impact that we would have hoped for when we started,’ back in March.
  
• Analysts said that the comments were perceived as lessening the chances that the central bank would expand its loose monetary policy at their next meeting in November, which to some extent, had already been priced into the market.
  
• His comments echoed those made by fellow MPC member, and deputy Bank governor, Charles Bean, who said on Tuesday that as the recovery proceeds, the Bank would need gradually to remove the large monetary stimulus or risk overshooting its 2 per cent inflation target.
  
• Sentiment towards the pound has remained buoyant in trading this morning, with the pound currently consolidating its positions above 1.09.