The RBNZ have stated that monetary policy will begin to tighten, boosting demand for the kiwi

Sterling lost over four cents, or 1.8% to the kiwi dollar in trading yesterday as the Reserve Bank of New Zealand hinted at future rate rises in their policy meeting.

• Sterling was under pressure throughout European trading after the UK's pre-Budget Report did little to ease lingering concerns over Britain's debt problems.
  
• The Chancellor, Alistair Darling, outlined various spending cuts and taxes, as well as lowering this year's growth forecasts, but little encouragement was given that the government would be able to curb the spiralling deficit.
  
• In the evening, the kiwi received a renewed boost after New Zealand's Central Bank opened the door to rate rises from as early as next April.
  
• The RBNZ said that it may start withdrawing monetary stimulus by the middle of 2010, amid an improving local and global economic outlook.
  
• This morning, the market is continuing to move the kiwi higher, with the sterling/NZD pair now trading at a one month low, currently hovering just below 2.24.

Strong employment figures are supporting the aussie

The pound slid 0.7% against the Australian dollar yesterday after the UK's pre-Budget Report failed to abate fears over the UK's deteriorating fiscal stability.

• Sterling lost ground after investors questioned the feasibility of the government's forecasts for borrowing and spending in the report.
  
• Some investors were skeptical of Darling's 1.5% growth projection for the UK economy in 2010, which in turn undermined his outlook for bringing down the country's deficit and debt.
  
• The aussie is continuing to trade strongly this morning in the wake of positive employment data from Australia.
  
• The data revealed the economy added 31,200 jobs last month, beating forecasts of a modest rise of 5,000. The result brought the overall unemployment rate down to 5.7% from 5.9% support strong aussie demand.
  
• Analysts noted that with unemployment now potentially on the decline, the RBA will be more confident in returning their base rate to pre-recession levels.

The single currency nudged higher against the USD yesterday and is holding around 1.47 so far this morning

The single currency reversed its recent downward trend against the US dollar, posting slight gains as the market felt the greenback's rally may have been over-stretched.

• The euro initially made up solid ground as investors reassessed a rally that had sent the greenback to its highest level in more than a month.
  
• The US dollar had advanced broadly on Tuesday after ratings agency Fitch downgraded Greece to below the single A bracket for the first time in a decade.
  
• The euro reversed these losses though, on the view that the weak status of Greece's public finances was already well known and that the currency's move had been overdone.
  
• In the afternoon, the dollar pared some its losses after the rating agency Standard & Poor's lowered its outlook on Spain's credit rating, adding to concerns that sovereign credit problems have not abated.

Concern over British fiscal instability weighed on sterling yesterday as it moved lower against the USD

Sterling continued its downward trend against the US dollar, edging lower as sentiment weighed on the fiscal health of the UK economy.

• The pound dropped to its lowest level in almost two months at $1.6169 as the UK government's pre-Budget report focused attention on the health of the country's finances.
  
• Concerns over government debt have come to the fore in recent days following a downgrade of Greece's credit rating by Fitch, the ratings agency.
  
• This has weighed on sterling, given the possibility that the UK may face a similar fate if it does not get its public finances in order
  
• The government's report deemed it too early to begin an assault on the UK's budget deficit, however, because of fears that deep spending cuts could choke off an economic recovery.
  
• The pound did recover some of its steep losses though as US equity markets enjoyed a slight rally later in the day lending support to the weakened UK currency.
  
• In trading this morning, the pound is continuing to move lower as investors await the BoE's rate decision. The market is widely expecting to see rates hold at 0.50%.

The UK currency was under pressure yesterday after the pre-Budget Report failed to ease concerns over the UK economy

After briefly spiking to an intra-week high, the pound slid back against the single currency yesterday as investors digested Chancellor Alistair Darling's pre-Budget Report.

• In the Report, the Chancellor admitted that the recession had turned out to be deeper than he predicted in April. He said he expected the economy to have shrunk by 4.75% in 2009, instead of the 3.25 - 3.75% he forecast earlier in the year.
  
• While cutting his growth forecast for this year though, Mr. Darling kept his prediction of a strong recovery next year and in 2011 and 2012.
  
• He talked of the "strength of the UK economy", predicting growth of between 1 and 1.5% in the coming year, which gave the pound brief support.
  
• However, the Report did little to ease ongoing fears of the UK's fiscal debt. With increased borrowing planned for next year, concerns are likely to linger over the possibility that the UK's triple-A rating may come under threat.
  
• In trading today, the markets will be looking to the BoE's interest rate decision at 12:30 and the accompanying statement where they may shed some light on when quantitative easing measures will come to an end.