US Dollar strengthens vs. GBP after Fed decision

The pound weakened by 0.48 cents (0.29%) against the US dollar yesterday, finishing the day at $1.6404.

• In early trading yesterday sterling rose against the greenback, as the US currency came under broad selling pressure in the build-up to the US Fed interest rate decision later that day. Investors were convinced the Fed would quell recent speculation of a possible interest rate rise later this year, a move which analysts believe would sting the dollar.
  
• Sterling’s rise was little affected by CBI realised sales data out mid-morning, which revealed UK retail sales fell at the same pace as the previous month.
  
• However, dovish comments from Bank of England Governor Mervyn King capped sterling’s gains in late trading after he said he had genuine concern about how quickly the UK economy would pick-up from the recession.
  
• Finally, the Fed’s decision to leave interest rates on hold and not extend its quantitative easing program because of a slowing in the pace of economic contraction was taken positively by investors, who bought into the greenback as a result.
  
• In trading so far today the pound has risen against the dollar as investors continue to pick over yesterday’s announcements.
  
• There are no major announcements due in the UK today, whilst in the US there are three notable economic releases: Unemployment Claims and annualised first-quarter GDP data is out at 13.30 BST, whilst at 15.00 BST Fed Chairman Ben Bernanke is due to testify in front of a House committee.

Fed's decision hits euro vs. USD

The euro weakened by 1.49 cents (1.06%) against the US dollar yesterday to close the day at $1.3927.

• In early trading yesterday the euro fell against the dollar, after the European Central Bank announced it would lend 442.24 billion euros to banks in its first ever one-year refinancing operation.
  
• After briefly heading into positive territory, the single currency then fell against the dollar despite a US government report showing durable goods orders unexpectedly rose 1.8% in May.
  
• Finally, the US Fed’s decision to leave interest rates on hold and not extend its quantitative easing program plunged the single currency further into the red. Its decision to ‘wait-and-see’ after a slowing in the pace of economic decline recently prompted traders to buy into the greenback.
  
• In trading so far today, the euro has risen against the dollar as investors continue to dissect yesterday’s important announcements.
  
• There are no major announcements due in the eurozone today, whilst in the US Unemployment Claims and annualised first-quarter GDP data is out at 13.30 BST. At 15.00 BST Fed Chairman Ben Bernanke is set to testify in front of a House committee.

Aussie gains ground after CB data

The Australian dollar gained further ground against sterling yesterday, posting gains for the third straight day as investors bought back in to higher-yielding currencies.

• A recovery on the FTSE and a rally on the Dow Jones yesterday encouraged investors to shun safe haven currencies and buy back in to higher yielders, such as the aussie and kiwi.
  
• The aussie also gained support overnight from the release of the Conference Board Index, which increased in April for the third consecutive month.
  
• The aussie dollar is likely to remain attractive to investors for some time, as Australia currently has the highest yield amongst all the developed countries, with the RBA unlikely to cut interest rates further.

Kiwi up after BoE Governor's comments

The kiwi strengthened against the pound yesterday, after poor retail sales data and dovish comments from the head of the UK’s central bank reduced investor appetite for sterling.

• Sterling weakened in early trade against the kiwi yesterday after CBI realised sales data revealed no slowing in the pace of decline in UK retail sales from the previous month.
  
• These falls were extended after Bank of England Governor Mervyn King said he was ‘more uncertain now than ever’ about the UK economy.
  
• Trade today will be dictated by anticipation of New Zealand’s latest GDP figure, released tonight.

Sterling falls vs. euro on flat FTSE

Sterling fell by 0.99 cents (0.84%) against the euro yesterday to close the day at 1.1686.

• In early trading yesterday sterling dropped by over a cent against the euro, after a tumble on US stocks overnight prompted London equities to head lower initially.
  
• The pound fell despite better-than-expected figures released by the British Bankers’ Association, which showed the number of mortgages approved for house purchases in May rose 15.8% on a year earlier, ending months of annual declines. However, approvals remain well below historical averages.
  
• In trading so far today the pound has continued its slide against the euro, as investors eye the large amount of data out today.
  
• There are no major economic releases due in the eurozone today, whilst in the UK there are a series of announcements out. At 11.00 BST, CBI Realised Sales are out, followed by Inflation Report Hearings at 14.30 BST. Finally, Bank of England Governor Mervyn King is due to give a speech at 15.45 BST.

Sterling edges ahead of US Dollar after choppy day's trading

In a choppy day’s trading yesterday, sterling strengthened by 1.07 cents (0.65%) against the US dollar to finish at $1.6452.

• In early trading yesterday the pound weakened against the dollar after heavy falls on US and Asian stock markets overnight rocked risk appetite.
  
• However, recurring concerns about reserve currency diversification helped the pound yesterday, after ratings agency Moody’s said one threat to the US’s triple-A sovereign credit rating would be if it lost its status as the world’s primary reserve currency.
  
• Investors were nevertheless cautious about taking on large positions ahead of the US Fed’s latest interest rate decision due later today, capping sterling’s gains.
  
• In addition, sterling also lost momentum against the greenback after US data showed sales of previously owned homes in the country rose at a slower-than-expected pace in May.
  
• In trading so far today, the pound has continued its rise against the dollar as investors prepare themselves for a raft of data out today.
  
• In the US, Core Durable Goods Orders (MoM) are released at 13.30 BST, followed by New Home Sales at 15.00 BST. Finally and most importantly, at 19.15 BST the US Fed gives their latest interest rate announcement and statement. In the UK, CBI Realised Sales are out at 11.00 BST, followed by Inflation Report Hearings at 14.30 BST. Lastly, Bank of England Governor Mervyn King is set to give a speech at 15.45 BST.

Euro up over 2 cents vs. US Dollar

The euro rose considerably against the euro yesterday, strengthening 2.1 cents (1.51%) to close the day at $1.4076.

• In early trading yesterday the single currency rose sharply against the greenback, after European equity markets stabilised following steep falls on US equities overnight. On Monday, the DOW suffered its worst one-day loss in two months.
  
• The dollar also fell as the market awaited the outcome of a US Fed policy meeting later today, and a record $104 billion in US debt issuance this week. Traders will be watching closely to see what the Fed says about the economic outlook and its debt-buying programme, with markets skittish over the possibility of dovish comments.
  
• The single currency’s gains were also slightly capped by US housing data released mid-afternoon, which showed a slower-than-forecast rise in sales of previously owned homes.
  
• In trading so far today the euro has continued its rise against the greenback, as investors brace themselves for some important announcements out in the US.
  
• First, Core Durable Goods Orders (MoM) are released at 13.30 BST, followed by New Home Sales at 15.00 BST. Finally, the US Fed is to deliver its latest interest rate announcement and statement at 19.15 BST.

Aussie makes small gains over sterling

The aussie made small gains against the pound yesterday, as investors wait on the sidelines ahead of the Federal Reserve’s policy decision due this evening.

• The US Fed is set to issue a statement after its latest policy meeting at 19.15 BST today, with some investors suggesting the central bank may try and curb speculation of any policy tightening this year.
  
• Traders are also wary of taking large aussie positions at present, as they are undecided about whether recent weakness in equity markets was just a short-term pull-back, or the start of a more protracted decline.

Kiwi makes strong gains vs. sterling as equities flat

The New Zealand dollar made strong gains against sterling yesterday, gaining 2.75 cents against the pound as investors reconsidered riskier assets.

• A flat day on London equities, following heavy falls the day before, led investors to sell the pound and the US dollar to buy back into higher-yielding currencies.
  
• Today, investors will turn their attention to the raft of economic releases out in the UK and US.

Polish zloty in choppy trading, rate decision tomorrow

It was a choppy week’s trading between sterling and Polish zloty last week, with economic releases first weakening and then strengthening the Polish currency. Polish producer prices figures released on Friday revealed a worse-than-expected rise in the annual rate by 3.7% in May, down from April’s revised 4.8% rise. This prompted a weakening in the zloty, however industrial output figures released the same day gave it a boost after they revealed a slowing in the pace of decline in the sector. Industrial output in May fell by an annual rate of 5.2%, which is slower than a revised 12.2% year-on-year decline in April, according to figures released by the Polish government. The zloty’s rally was further aided yesterday following a positive inflation figure, excluding food and energy prices, which showed a rise to 2.8% on the year in May from 2.6% in April. This figure was slightly above the forecasted figure of 2.7%. Attention has now turned to tomorrow’s Polish interest rate decision, where most analysts are forecasting a rate cut to 3.50% following the fall in inflation.