Australian dollar holds its ground

The Australian dollar held its ground against sterling yesterday, as UK manufacturing figures came in stronger than forecast. Data revealed the rate of decline in British manufacturing eased more than expected last month, which caused speculation that the government’s aggressive monetary easing may be starting to take effect. However, investors remained cautious given the overall economic outlook for the shorter term remained bleak. This was reinforced by comments from BoE policymaker, David Blanchflower, who stressed that the UK had yet to feel the pain of rising unemployment. Much of the bad news is already priced into sterling but the turning point for the UK economically still seems a little way off.

Japanese yen experiences turbulent trading

The movement of the Japanese yen has been quite turbulent today, as the currency was hit first by the Bank of Japan’s survey of corporate activity showing that confidence in the sector is dropping at a record pace, to reach its lowest point ever in the first quarter. Companies stated that the domestic market had a bleaker outlook than the foreign market.

Later the yen quickly recovered ground after news that the White House was prepared for the bankruptcy of Chrysler, but retreated slightly when an administration official reported it was inaccurate.

The BOJ is expected to meet next week to discuss the tankan (a quarterly poll of business confidence) and deflation, with speculators believing that the central bank will maintain its 0.1 percent interest rate.

Sterling / euro flat on the day

Yesterday proved to be a flat day for trading ahead of the G20 summit that kicks off in London today. The quiet trading for GBP/EUR came despite the FTSE 100 finishing the quarter on a positive note, rising by 4.3% and ending its worst first quarterly performance since its inception in 1984. It was also revealed that Gfk NOP’s Consumer Confidence Index stood at -30 in March, a rise of five points from February. This was an unexpected rise in consumer confidence, although it is still very early days to suggest that there is any significance to this.

Within the eurozone, Fortis revealed a larger than expected loss of €28bn after the bailout of the Belgian and Dutch bank last year. Fortis, which was part of the consortium that took part in the ill-fated take over of ABN Amro in 2007, was nationalised last year as the bank ran into serious financial trouble.

Both the eurozone and the UK release PMI manufacturing data this morning, with investors also keeping a keen eye on London and what, if anything, comes from the G20 summit.

Rallying equity markets weaken the US dollar

The pound strengthened by 0.57 cents against the US dollar yesterday as rallying stocks saw investor risk appetite improve and demand for the risky pound increase. Confidence returned to the markets at the end of the first quarter 2009 as the FTSE 100 index rose 4.3% and the S&P 500 index (US) saw the close of its best month since October 2002. In the US both the S&P/Case-Schiller Home Price Index and the Chicago Purchasing Managers Index fell more than expected whilst consumer confidence data mirrored investor sentiment and improved. There were no major economic announcements in the UK.

Early in yesterday’s trading a report from the White House suggested that the US government would allow the car giants to go bankrupt, however officials later said that this report was inaccurate, alleviating investors’ concerns.

In today’s trading the pound has continued to hold its ground, with trading remaining around yesterday’s close. Later today Purchasing Managers Index manufacturing data and Halifax house price figures are released in the UK. In the US, MBA Mortgage Applications, ADP Employment Change, construction spending, ISM manufacturing and pending home sales are released. Investors will also be watching for any news from the G20.

Euro strengthens against the dollar despite German unemployment

The dollar weakened against the euro yesterday, despite data released in the eurozone showing that German unemployment increased for a fifth month, pushing the jobless rate to 8.1%. The dollar’s losses came on the back of a rise in US stocks on Wall Street, which improved risk appetite.

This morning the dollar has recovered some ground, and may rise on the back of the G20 meeting, because a failure by leaders to unanimously agree on ways to revive the global economy could push investors to the safe haven of the greenback. Investors are also eagerly awaiting the US employment report due to be announced on Friday, which is expected to show a higher number of job losses in March in comparison to the previous month.

There are several announcements taking place in the US today including MBA Mortgage Applications, ADP Employment Change, ISM Manufacturing and Pending Home Sales. The Unemployment Rate is due to be released in the eurozone this morning at 10.00 BST.

New Zealand dollar recovers losses

The New Zealand dollar regained previous losses against sterling yesterday, as month-end and quarter-end flows improved demand for risk appetite, supporting the kiwi. Previous falls were seen after the Reserve Bank of New Zealand said interest rates had got out of line with expectations, and that it expects to keep rates low for some time. The National Bank of New Zealand business confidence survey yesterday showed sentiment in March still remain low with no signs of near term improvement.

Australian dollar regains some ground

The Australian dollar has regained some of yesterday’s losses against the pound as a rally in stocks boosted higher yielding currencies. Gains were limited due to brighter UK economic data and a boost by month and quarter end capital flows. Data yesterday showed British consumer confidence rose to a ten month high in March, as lower mortgage repayments boosted disposable income. Sentiment was also helped by Barclays, who declined to take part in the UK government’s asset protection plan, unlike Lloyds TSB and RBS.

Pound finishes marginally up against the euro

In a relatively quiet day for trading, the pound finished marginally up against the single currency despite the FTSE 100 tumbling 3.5%. Banks led the fall in equity prices following the US rejecting plans for carmakers, prompting worries over the future of the industry. Investors promptly became risk averse, with safe haven currencies being the main beneficiaries. The UK was boosted as mortgage approvals grew almost twice as much as expected in February, and to the highest level seen in almost a year.

News out of the eurozone was poor, with Spain and the Republic of Ireland releasing negative news. It was revealed that the Bank of Spain will take over the Caja Castilla la Mancha, which is the first bank bailout in Spain since the credit crisis reared its head. Shares in other major Spanish banks, such as Santander and BBVA, fell over concerns of the health of the Spanish financial sector. Spain has been hit hard in the past 18 months, with unemployment climbing towards 15% and the housing sector becoming increasingly sluggish. It was also revealed that Standard and Poor’s cut Ireland’s credit rating from AAA to AA+ yesterday, over concerns of the country’s worrying public finances. The agency also warned that the rating could be cut again as debt levels increase.

The UK releases their index of services data this morning, whilst the eurozone reveals their consumer price index figures.

Pound posts small gains against the dollar despite risk aversion

The pound strengthened over the US dollar by 0.33 cents in Monday’s trading to close at the 1.4264 level. Earlier in the day the pound had hit a low of 1.4113 as equity markets fell, risk aversion spread and jitters surfaced ahead of the G20 meeting this week. UK shares fell as much as 3.5% after the US government’s ‘auto task force’ rejected viability plans from General Motors and Chrysler and warned that bankruptcy remained an option. However, the pound did pare its losses in later trading and there were some positive announcements in the UK yesterday - mortgage approvals rose to 38,000 in February from 34,000 in January and the GFK Consumer Confidence index improved.

In today’s trading there has been little movement as investors await the announcement of consumer confidence data, the S&P/Case-Shiller Home Price Index, Chicago Purchasing Managers’ Index and the ABC/Washington Post Consumer Confidence in the US. Whilst there are no major economic announcements in the UK today, investors will be paying close attention to British news ahead of tomorrow’s G20 meeting.

Euro weakens against the dollar as equities fall

The euro weakened against the dollar yesterday following a fall in US stocks. Additionally the Obama administration proposed that the best chance for success for General Motors Corp. and Chrysler LLC may be bankruptcy, while Treasury Secretary Timothy Geithner stated there could be further government assistance in relation to supporting some banks. The euro reached a one and a half week low against the dollar, hitting $1.3117 amid thin trade, as investors await the G20 summit and the ECB’s interest rate decision on Thursday, where they are expected to announce an interest rate cut as well as quantitative easing.

ECB President Jean-Claude Trichet addressed the European Parliament yesterday, stating that the eurozone economy has weakened since January and that there is "a high degree of uncertainty" with regards to economic outlook. Nevertheless, he said there are no substantial risks for deflation and that the central bank will do what is required to abate the financial crisis. This statement improved the euro slightly, following its increasing weakness on the back of news that Standard & Poor's Ratings Services lowered Ireland's long-term sovereign credit rating to 'AA+' from 'AAA.' S & P also downgraded Hungary’s credit rating on Monday to BBB-.

The Consumer Price Index will be released in the eurozone this morning at 10.00 BST. In the US, Consumer Confidence, Chicago Purchasing Managers’ Index and ABC/Washington Post Consumer Confidence will be announced this afternoon.