Sterling weakens sharply vs. euro despite jobless figs

Sterling weakened by 0.97 cents (0.82%) against the euro yesterday to close the day at 1.1761.

• In early trading yesterday sterling fell by over a cent against the euro, despite better-than-expected UK Claimant Count figures out mid-morning. Those claiming unemployment benefits rose by 39,300 last month, much less than the 60,000 increase analysts had been expecting.
  
• Instead, sterling weakened on the back of the latest Bank of England minutes, which revealed policymakers felt there was no reason to change their medium-term outlook on the economy and inflation despite more encouraging data out recently. The bank voted unanimously to keep interest rates on hold and not extend their quantitative easing program.
  
• Falling UK equity markets provided little respite for the falling pound yesterday. The FTSE 100 eventually finished the day down 50.11 points (1.16%).
  
• In trading so far today the pound has continued its slide against the euro, despite UK Chancellor Alistair Darling’s announcement last night that the recession was easing.
  
• There are no major announcements due in the eurozone today, whilst in the UK Retail Sales (MoM) are out at 09.30 BST.

Sterling weakens as BoE minutes weigh

The pound weakened slightly against the US dollar yesterday, falling by 0.13 cents (0.08%) to finish the day at $1.6397.

• In early trading yesterday sterling weakened against the dollar, after minutes from the Bank of England’s latest meeting revealed no alteration in their medium-term economic outlook. This news was taken negatively by the market following some more positive data out in the past few weeks.
  
• However, the pound’s losses were capped after some better-than-expected UK employment data, which revealed an easing in the rate of unemployment. The number of people claiming jobless benefits rose by 39,300 last month, below the 60,000 increase expected.
  
• Sterling ’s falls also came despite weaker-than-forecast inflation data out in America. US CPI rose just 0.1% in May, dragging the annual inflation rate down to its lowest level since 1950. This fuelled speculation that the US Fed will rule out an interest rate rise in the medium-term at their meeting next week.
  
• In trading so far today the market remains relatively unchanged, as investors continue to digest President Obama’s financial regulation plans announced last night.
  
• In the UK, Retail Sales (MoM) are due at 09.30 BST today, whilst in the US Unemployment Claims are out at 13.30 BST.

Euro finishes up over a cent vs. US Dollar

The euro strengthened by 1.05 cents (0.76%) against the US dollar yesterday to close the day at $1.3939.

• In early trading yesterday the euro edged up against the dollar as the single currency tracked a recovery in crude oil prices. However, an initial 0.5% dip in European equities capped its gains.
  
• The dollar again slid on renewed speculation its position as the world’s premier reserve currency could be under threat. A summit involving the leaders of the emerging BRIC nations has forced the issue onto the currency agenda, particularly after Russia last week said it would cut the amount of US Treasuries it held.
  
• Disappointing US consumer price index figures, which showed a rise of just 0.1% in May, kept up the downward pressure on the greenback, as it made a US interest rate rise even more unlikely this year.
  
• So far today the euro has edged slightly higher against the dollar, while investors continue to pore over President Obama’s new regulation plans detailed last night.
  
• There are no major announcements due in the eurozone today, whilst in the US Unemployment Claims are out at 13.30 BST.

Aussie gains on profit-taking

The Australian dollar made some gains against sterling yesterday, after investors began to take profits on the pound’s recent sharp gains.

• The pound’s fall came despite a much smaller than expected rise in the UK claimant count for unemployment, which should have added weight to optimism about a British economic recovery.
  
• But investors instead focused on the Bank of England minutes, which expressed caution over the UK’s economic outlook.
  
• Further clues on the health of the UK economy will be eyed today, with the release of a raft of data including Retail Sales.

Pound falls against kiwi

The New Zealand dollar made gains against the pound yesterday, despite falling equity markets and investors remaining cautious about taking on added risk.

• The kiwi’s rise against sterling was due to investors taking profits on the pound’s recent gains.
  
• Markets still remain uncertain over the global economic outlook, which reflects the currency movement having no clear direction.
  
• The kiwi was little moved by comments from Reserve Bank of New Zealand Governor, Alan Bollard, who reiterated that the economy was likely to start growing again by the end of the year but the recovery would remain fragile.

Sterling rises vs. euro on inflation figure

Sterling strengthened against the euro by 0.35 cents (0.30%) yesterday to close the day at 1.1858.

• In early trading yesterday sterling rose against the single currency, after data released in the UK showed inflation fell less than forecast in May. Yesterday’s UK CPI reading of 2.2% was slightly down on the 2.3% registered in April, but still comfortably above the Bank of England’s target of 2% inflation. Deflation now looks increasingly unlikely.
  
• However, sterling’s gains were capped to some extent following the release of better-than-expected German ZEW Economic Sentiment survey. This month’s reading of 44.8 was well ahead of the 35.0 predicted, bolstering investor hopes of eurozone recovery.
  
• In trading so far today the pound has pared some of the gains it made yesterday, as investors look ahead to important UK employment data out later today.
  
• There are no major announcements due in the eurozone today, whilst in the UK Claimant Count Change data and MPC Minutes are out at 09.30 BST.

US Dollar falls on Medvedev comments

Sterling rose by 0.91 cents (0.56%) against the US dollar yesterday, finishing the day at $1.6410.

• In early trading yesterday sterling strengthened against the dollar, after Russian President Dmitry Medvedev hinted that Moscow may be looking to reduce the share of US assets from its reserve currency portfolio.
  
• The pound’s gains were further extended following the release of UK inflation figures mid-morning. May’s reading of 2.2% was slightly down on April’s reading of 2.3% but not as low as the 1.9% analysts had been forecasting.
  
• In trading so far today the pound has continued its rise against the greenback as the leaders of Brazil, Russia, India and China continued their first summit, pushing the sustainability of the dollar’s reserve status to the top of the currency market’s agenda once again.
  
• In the UK, Claimant Count Change data and MPC Minutes are due at 09.30 BST, whilst in the US Core CPI (MoM) is out at 13.30 BST. US Fed Chairman Ben Bernanke is also due to speak at 17.00 BST.

Euro finishes up against US Dollar

The euro strengthened by 0.32 cents (0.23%) against the US dollar yesterday to close the day at $1.3834.

• In early trading yesterday, the euro strengthened against the dollar after a surprising rise in the German ZEW Economic Sentiment bolstered hopes for the eurozone’s chances of economic recovery. This month’s reading of 44.8 was well ahead of the 35.0 expected.
  
• The downward pressure on the dollar was further increased yesterday after the news that Russia may be looking to diversify its reserve currency portfolio away from the greenback prompted traders to sell the US currency.
  
• In trading so far today the euro has resumed its rise against the dollar, as the first summit of the fast-growing “BRIC” nations continues. The meeting has once again thrust the dollar’s status as the world’s premier reserve currency onto the agenda.
  
• There are no major announcements due in the eurozone today, whilst in the US Core CPI (MoM) is out at 13.30 BST and Fed Chairman Ben Bernanke is to speak at 17.00 BST.

Aussie falls to 7-week low against sterling

The Australian dollar fell to near 7 week lows against sterling yesterday, as the aussie was hit by further falls in commodity prices.

• Australia is one of the world's leading commodity exporters so falls in prices will generally put pressure on the aussie.
  
• The local currency also gained little support from the RBA's minutes, which stated there was no pressing need for the central bank to cut rates further.
  
• However, analysts remain concerned that the ongoing pressure on funding costs would put upward pressure on mortgage rates. This was verified by the country’s leading mortgage lender raising its variable mortgage rate. This has increased speculation that the central bank may have to cut rates further.
  
• Sterling also received a boost yesterday from firmer than expected inflation data, which showed CPI prices fall to 2.2% in May. Analysts had expected a bigger fall and it helped increase speculation that the chances of deflation were now quite low.

Kiwi holds vs. aussie, down against sterling

The New Zealand dollar had a mixed day yesterday, holding steady against the aussie but losing ground to a stronger pound.

• Investors continue to take a guarded view over the potential economic recovery, with a mixture of weak and upbeat economic news clouding the issue.
  
• The kiwi weakened considerably against sterling yesterday, with the pound being supported by the view that the UK economy may be slowly recovering.