Positive US data supported a late rally in the kiwi yesterday after it fell sharply on falling equities

The kiwi dollar erased early losses yesterday as positive further positive data in the US attracted investors to the higher-risk currency.

• In early trading the pound gained steadily, benefiting from a hefty loss in global shares, which encouraged investors to trim their exposure to risk.
  
• Investors retreated from risk assets as European share prices fell 2% in the wake of renewed concerns over the banking sector.
  
• In the afternoon session though, data revealed that US Factory orders increased 0.9% in September, following an unrevised 0.8 decline in August, the fifth increase in the last six months.
  
• The data added to a string of positive economic figures that have come out of the US recently and boosted confidence over the strength of the global recovery, lending support to the New Zealand currency.
  
• In trading this morning, the kiwi is trading marginally higher with the price currently hovering just below 2.28.

Apprehensive words from the RBA kept the aussie on the back foot in trading yesterday

The pound climbed back over 1.82 against the aussie after a statement from the RBA dulled the possibility of a rate rise in December.

• In their rate statement early Tuesday morning, the Reserve Bank of Australia, though they did raise the base rate to 3.50%, sounded a more dovish tone than many expected.
  
• In response investors pared back expectations of a further rate rise next month after Glenn Stevens, RBA governor, said higher rates would come "gradually" and that the rise in the Australian dollar, which has gained 27% against the dollar so far this year, might hurt exports and economic growth.
  
• In addition, the announcement of the UK banking shake-up added to the negative sentiment towards the pound, underscoring the potential problems ahead for the economy and its troubled financial sector.
  
• In trading this morning, the pound is marginally down although an unexpected fall in Australia's September retail sales has added to doubts about a further near-term rate rise, slowing the aussie's gains.

The dollar pushed higher against the euro as weaker stocks raised risk aversion in the market

The dollar rose to a one-month high against the euro yesterday as a sell-off in global equities drove haven demand for the US currency.

• The dollar climbed strongly as stocks fell on evidence that banks are struggling to shake off the effects of the financial crisis, damping higher-yield demand.
  
• The single currency declined sharply from a session high of 1.4810 on Asian trade moving to a fresh one -month low at 1.4645, as stock markets plunged following weak results from UBS and news that RBS and Lloyds will undergo a severe shake up.
  
• The single currency came under further pressure in the wake of a rather gloomy economic outlook from the European Commission.
  
• The organisation stated that the EU economy will recover gradually over the next two years as unemployment and government budget deficits continue to climb. The commission expects the bloc's economy to contract by 4.1% this year before expanding 0.7% next year.
  
• The report continued, stating that EU unemployment will likely reach 10.9% in 2010 and warned about a "highly uncertain" economic outlook in the region, which weighed on euro strength.

Having made broad gains, the dollar slipped back on more positive US data

Sterling pulled back over a cent and a half from a two-week low of $1.6264 hit against the dollar yesterday morning, to close the day marginally up at $1.6427.

• Initially, the pound fell sharply after the UK Treasury announced a shake-up of British banks and as investors braced for a possible extension of asset purchases by the Bank of England this week.
  
• Britain's two largest retail lenders, the part-nationalised Royal Bank of Scotland and Lloyds Banking Group will between them sell off businesses equating to 10% of the UK retail banking market to appease EU competition concerns.
  
• The shake-up highlighted the fragility of the financial sector, which is a key part of the UK economy, and added to concerns about the country's public finances.
  
• However, the pound staged a slight rally in the later session as data revealed that US factory orders increased by 0.9% in September, the fifth increase in the last six months, which supported rising optimism for the US economic recovery.
  
• Analysts also suspect that traders decided to sell out of the dollar rally in the later session with investors now eyeing the Federal Reserve's interest rate statement at 19:00 this evening.

The pound is trading well against a weak single currency undermined by EU reports

Sterling posted solid gains against a broadly weaker single currency yesterday, rallying to a close of 1.1155 as the EU commission voiced concern over the eurozone economy.

• The pound erased Monday's losses against the euro as demand for the single currency waned in the wake of an EU report that spoke of a "highly uncertain" recovery in the eurozone.
  
• Fears over the banking sector within the 16-nation bloc also brought the single currency under pressure, with the EU Commission estimating huge potential bank losses in 2010.
  
• In addition, European stocks fell sharply in the wake of news that UBS, the Swiss bank, reported a greater than expected loss. In the UK, RBS announced it was taking more public funding and Lloyds Banking Group announced a rights issue.
  
• In the afternoon, data revealed that UK house prices rose by another 1.2% in October, according to the Halifax, which is the fourth monthly increase in a row .
  
• Nationally, house prices have risen by 2.9% since the end of 2008 and they are now 7.1% higher than six months ago when prices reached a trough in April, which buoyed demand for the UK currency.