Sterling lost further ground to the kiwi yesterday in the wake of the BoE inflation report

Sterling fell another 0.5% against the kiwi dollar as confidence in the UK economy was undermined by the BoE and Mervyn King.

• "The depreciation of sterling should lead to a recovery in economic activity," King said after the bank's quarterly report was published. "The outlook for inflation is again highly uncertain."
  
• Given more recent positive economic fundamentals in the UK, the market had anticipated a relatively upbeat report. However the dovish tone saw investors sell off the pound sharply after the report was released, taking it down to near two-week low against the kiwi.
  
• The kiwi has continued to gain in trading this morning, finding support from firmer Asian equities.
  
• Overnight, retail sales data was released in New Zealand, which actually disappointed market expectations. Sales rose by 0.2% in October, falling short of forecasts for a monthly rise of 0.5%
  
• However, the kiwi remains steady on the day,as yesterday's inflation report continues to weigh on the pound.

The aussie is climbing strongly against the pound, supported by risk appetite and positive employment figures

The aussie continued its climb against the pound yesterday, advancing for the fourth straight day, as the positive data from China encouraged risk appetite.

• Investor sentiment was boosted by Chinese data that showed the country's economy continued to recover. Industrial output in China, Australia's closest trading partner, rose by a better-than-forecast 16.1% in October, which heightened investors' appetite for risk.
  
• Analysts said the news had lifted risk appetite, encouraging carry trade investors to sell the low-yielding dollar to fund the purchase of riskier, higher-yielding assets.
  
• In the UK, the BoE's inflation report disappointed investors, focusing on the uncertainties surrounding growth and reiterating that the Bank is not yet ready to say to the market that it has finished with quantitative easing .
  
• In trading this morning, the aussie has found further support after stronger-than-expected Australian employment data for October, fuelled bets for another interest rate rise this year.
  
• Data showed that 24,500 jobs were actually created in October, confounding forecasts of for a loss of 10,000. It adds to mounting evidence that Australia is at the forefront of economic recovery and currently the aussie dollar is a further cent up against the pound.

Having reached a high above 1.50 on positive data, the euro slipped back as investors trimmed their long positions

The single currency reached a near 15-month high yesterday, but could not consolidate its position above 1.50 and retreated to close the day marginally down at 1.4980.

• The US dollar broadly sank versus most rivals yesterday, facing pressure as traders showed renewed appetite for risky assets and a "carry-trade" strategy centered on selling the greenback.
  
• Equity markets resumed their upward climb as investors showed renewed appetite for risky assets, which supported a move away from the greenback.
  
• In addition, further dovish comments from Federal Reserve officials also encouraged dollar selling, reinforcing the view that US interest rates would remain at ultra low-levels for the foreseeable future, strengthening demand for the euro
  
• Richard Fisher, the president of the Dallas Fed, who had been one of the most hawkish members of the central bank's policy committee, said he saw "more immediately deflationary concerns than inflationary ones."
  
• However, in the later session, the euro was unable to sustain such strong levels, steadily retreating back below 1.50 as traders cautioned over going too long ahead of 3 rd quarter GDP figures released in Germany and France on Friday.

Positive UK unemployment data was unable to buoy the pound in the wake of comments from Meryvn King

The pound tumbled to an intra-week low against the dollar yesterday after the BoE said recent weakness in sterling would continue to aid an export-led rebound.

• In early trading, the UK currency made hesitant gains after the Office for National Statistics said claims for jobless benefits rose by 12,900 in October, the slowest rate since April 2008 and far less that the official estimate .
  
• However, not too shortly after, the central bank's quarterly inflation report and Mervyn King's accompanying statement dampened the recent build up in confidence in the UK economy.
  
• The report did boost its forecast for growth and inflation, but continued to point toward maintaining low official interest rates well into 2010.
  
• The inflation projection showed a significant undershoot of the 2% target, which weighed on the pound. In addition the door for more quantitative easing was left far more ajar than people had anticipated.
  
• In this morning's session the pair is trading steadily around 1.6550, slightly below the overnight closing price. There is no data out in the UK today, though positive unemployment claims figures in the US, released at 13:30, may weaken demand for the haven currency.

The BoE's inflation report has put sterling under selling pressure, now back below 1.11 against the euro

The pound suffered in trading yesterday, losing over a cent (1.0%) to the euro after the Bank of England's November Quarterly Inflation Report struck a more dovish tone than expected.

• Bank of England Governor Mervyn King in a press conference reiterated an earlier opinion that a weaker currency should lend support to the recovery, putting pressure on sterling.
  
• King continued, stating that UK economy has "only just started" along its road to economic recovery, and told reporters that the central bank is keeping an open mind over the prospect of further boosting its quantitative-easing programme.
  
• Analysts said this reinforced the view that UK interest rates would remain at low levels for an extended period weakening demand the pound.
  
• The comments reversed slight gains made in early trading in the wake of positive employment figures. It was revealed that the overall UK jobless rate held steady at 7.8%, beating market expectations of a rise to 8.0%.
  
• In addition, the number of new people claiming employment benefit fell to 12.9K in October, a considerably improved figure from the 20.8K the previous month.