Dollar recovers over a cent against the pound as risk appetite eases

The pound relinquished gains yesterday as US markets fell for the first time this week, with the price closing down 0.3% at $1.6451.

• Sterling initially edged up against a weak dollar, as higher equities buoyed investor sentiment, with the FTSE on a five day rally.
  
• The dollar slipped further after data showed US housing starts and building permits in August rose to their highest level since November, raising risk appetite.
  
• Additionally, the Philadelphia Fed business index rose substantially in September, enabling the pound to briefly stretch over 1.6500.
  
• However, the dollar recovered it losses as US equities fell, with t he Dow Jones falling 0.08% and the Nasdaq down 0.30%.
  
• The greenback has continued to rally this morning, as investors reacted negatively to news that the FSA said that Lloyds Banking Group did not have sufficient funds to spurn the government’s Asset Protection Scheme.
  
• The dollar has already recovered over a cent (0.8%), as investors also cover short positions, with the price currently trading around 1.6340.