The kiwi retreated at the end of last week on a rise in risk aversion

The kiwi dollar struggled on Friday enabling the pound to jump 1.4%, briefly nearing the 2.30 level, as risk appetite in the market waned.

• Higher-risk currencies struggled to make headway at the end of last week as the rally in global equities in the wake of the positive US GDP data came to an abrupt halt.
  
• As global stocks fell, investors sought shelter in the haven currencies fuelling a sell-off in the higher-yielding kiwi dollar, buoying the sterling price.
  
• In trading this morning, the New Zealand dollar has pulled back from six-week lows against the pound, with profit taking in high-yield currencies taking a pause.
  
• Support has also come from improved manufacturing data in China, a key importer of New Zealand goods, which has outweighed some of the negative sentiment toward the currency.
  
• Analysts have noted though that reduced support for a rise in interest rates and lower risk appetite may prevent the kiwi from regaining its strong valuation.

Having weakened off sharply on Friday, the aussie is trading strongly against the pound this morning

The pound climbed just over two cents against a broadly weakened aussie dollar on Friday with a rise in risk aversion putting selling pressure on the higher-yielding currency.

• Weak data in the US and plummeting global equity markets enable the pound to gain as investors took the opportunity to cash profits in the aussie and retreat to safer assets.
  
• Analysts have recently noted that the rally in risky assets could come to an end. Conditions for perceived riskier assets to gain requires a flow of positive economic data combined with loose global monetary policies and low interest rates.
  
• The strong US GDP figure supported the rally in higher-yield currencies, but as the economic recovery shifts the balance in favour of tightening policy, it will likely signal the end of the rally in risky assets.
  
• However, the aussie is trading strongly again this morning, currently up over a percent, as investors bet that the Reserve Bank of Australia will raise interest rates at their meeting on Tuesday.
  
• Traders also said that Chinese data showing manufacturing activity at an 18-month high helped to mitigate some of the recent loss in risk appetite, bolstering aussie demand.

The euro lost ground to the dollar on Friday as the rally in equities came to a halt

The dollar strengthened, consolidating after broad selling on the back of data showing strong US growth, gaining over a cent on the single currency.

• Equities took a sharp downturn at the end of last week, having rallied after the positive US GDP data, most likely as a result of end of month profit taking, which buoyed demand for the greenback.
  
• Data also showed that US consumer spending fell for the first time in five months in September, coinciding with the end of the government's car scrappage scheme.
  
• The US Commerce Department says spending dropped 0.5% in September, compared with a 1.4% rise in August, which encouraged investors to buy back into the haven currency.
  
• The US dollar extended gains in the afternoon, pushing the euro down near three-week lows after data showed that a US Midwest manufacturing index was stronger-than-expected failed to heighten risk appetite.
  
• The euro has climbed in trading this morning with the price currently hovering around the mid 1.47 mark.

Dollar was buoyed at the end of last week as risk appetite waned

The greeback pulled back from its sharp sell-off on Thursday, as weak US economic data spurred a return to risk aversion.

• In early trading, the dollar continued to lose ground following the better-than-expected US growth data, however the GBP/USD rally was capped at 1.6600, and the UK currency pulled down steadily, eventually closing down 0.6% ay 1.6448.
  
• US markets went through losses on Friday, with financials and materials leading the path, as risk aversion returned after Thursday's optimism, strengthening support for the greenback.
  
• On the macroeconomic front, data revealed that US consumer spending declined 0.5% in September, the largest decline since December 2008, further buoying the dollar rally.
  
• Positive manufacturing data from the Midwest in the afternoon failed to dent dollar buying in the markets and traders acknowledged that part of this may have been due to month-end flows into the US currency related to foreign portfolios.
  
• The US currency has continued to climb in trading this morning, currently half a percent up, as investors remain cautious ahead of big events this week, including interest rate decisions in the UK, eurozone and US.

Pound edged up slightly against the euro on Friday but is down around 0.7% in trading this morning

The pound edged higher, achieving its biggest weekly advance against the euro since January, as signs pointed to the UK economic recovery talking hold.

• The pound/euro pairing was little changed at the end of last week, though sterling did creep up, supported by reports showing gains in consumer confidence and UK house prices.
  
• Month-on-month property prices were up for the sixth consecutive month in October and were 2% higher than in the same month the previous year. However, the pace of monthly price rises has eased, going up by just 0.4%.
  
• Meanwhile in the eurozone, data revealed that the unemployment rate rose to 9.7%, in line with market expectations, which raised concerns that recovery could still be destabilised, dulling demand for the euro.
  
• Last week the Bank of England completed its £175 billion asset purchase programme and so investors are now looking toward an extension of QE in their meeting this week.
  
• Analysts have noted that until the market is confident the BOE is done with quantitative easing, it is going to be very difficult for sterling to rally significantly from current levels.