Pound weakens against the US dollar

The pound weakened against the US dollar on Friday, finishing the day at $1.5177.

• Ongoing risk-aversion following some poor economic figures last week weighed on the higher-yielding pound, as investors looked to the perceived safe-haven of the greenback throughout the day.
  ,li>Much worse-than-expected first quarter GDP figures in the eurozone exacerbated this flight to safety as concern a global economic recovery may still be some way off weighed on “riskier” currencies like the pound. Figures released on Friday showed the contraction in the eurozone’s economy in the first three months of 2009 was a much larger-than-expected 2.5%, following a 1.6% fall in the last quarter of 2008.
  
• The figures dented general risk sentiment in the market, particularly after ECB President Jean-Claude Trichet’s announcement earlier last week that the global economy was at “an infliction point”. Investors reacted by selling off the pound, although it did remain above the psychological $1.50 level.
  
• In trading so far today the pound has continued its slide against the US dollar, as news that Lloyds Banking Group chairman Sir Victor Blank would step down before the bank’s 2010 AGM shook confidence in the markets.
  
• There are no major announcements in the UK today, however in the US the Treasury’s Timothy Geithner is due to speak at a Newsweek Magazine Event at 16.30 BST.

Euro falls sharply against the US dollar

The euro fell sharply against the US dollar on Friday, finishing the day at $1.3492.

• Much weaker-than-forecast first quarter GDP figures released in the eurozone on Friday reduced investor appetite for the single currency, as they opted instead for the perceived ‘safety’ of the greenback.
  
• Germany ’s export-led economy contracted by 3.8% in first three months of 2008, the largest fall since the country started recording quarterly data in 1970.
  
• Elsewhere, the Netherlands saw a 2.8% fall and Italy 2.4%, but the most dramatic decline was in Slovakia – the eurozone’s newest member – who recorded a staggering 11.2% fall in first quarter GDP. This reflected its dependence on car sales and exports to Germany.
  
• Overall, the 16-country region’s economy contracted by a much larger-than-expected 2.5% in the period, faster than the economic slowdown in the US, although analysts did say the figures may have been exaggerated by companies cutting production faster than demand fell, and running down inventories.
  
• Nevertheless, the figures induced a flight to the perceived safety of the greenback, as investors worried that the eurozone may have some way to go before its economic recovery begins.
  
• In trading so far today the single currency has resumed its slide against the US dollar as investors continue to digest Friday’s figures.
  
• At 16.30 BST today, the US Treasury’s Timothy Geithner is set to give a speech at a Newsweek Magazine Event. There are no major announcements in the eurozone today.

Australian dollar weakens as risk appetite falls

The Australian dollar weakened against sterling on Friday, as concerns over the timing of a recovery in the world economy saw investors become more risk averse.

• Recent optimism had driven the high-yielding aussie to multi-year highs against sterling.
  
• However, doubts over an imminent recovery in the global economy started to reverse much of those gains towards the end of last week.
  
• Stock markets fell across Asia overnight despite encouraging Consumer Confidence data from Japan, as uncertainty about a recovery in the world economy kept investors from buying riskier assets.
  
• Focus is likely to remain on economic data this week, with major inflation and retail sales data due out of the UK, while both the Bank of England and the Reserve Bank of Australia release minutes from their last meeting later this week.

New Zealand dollar remains on the back foot

The New Zealand dollar remained on the back foot on Friday, as increased risk aversion saw investors flee to the relative safe havens of the greenback and the yen.

• Weak retail sales from New Zealand late last week reinforced expectations that the Reserve Bank of New Zealand will cut rates again in the coming months.
  
• This is likely to continue to weigh on the kiwi, particularly given the ongoing gloomy economic outlook for the domestic economy.
  
• Stock markets across Asia fell overnight, despite better Consumer Confidence data from Japan, as uncertainty about a recovery in the world economy dissuade s investors from buying riskier assets.

Pound makes gains against the euro after German GDP data

The pound strengthened against the single currency yesterday, finishing the day at 1.1169.

• In early trading yesterday the pound weakened against the single currency, as the gloomy Bank of England Quarterly Inflation Report weighed on investors’ minds. Governor Mervyn King’s forecast that the UK economy’s recovery will be “slow and protracted” did little to ease sterling’s early plight against the euro.
  
• The BoE expects inflation to fall to 0.5 percent before rising to just above 1 percent in two years' time, while the economy is seen recovering at a slower pace than previously thought.
  
• Sterling was also under early pressure as stock markets were sluggish, although the FTSE 100 eventually finished the day 0.7% up, with a recovery in bank stocks benefiting the pound.
  
• However, in early trading today the euro is under selling pressure following Germany releasing worse than expected GDP data. The German growth figures showed their economy contracted by 3.8% in the first quarter, and by 6.9% on an annualised basis.
  
• With no major announcements due in the UK today, investors will turn their attention to the eurozone GDP figures released at 10.00 BST.

Pound weakens against the US dollar

The pound weakened against the US dollar yesterday, finishing the day at $1.5156.

• In early trading yesterday the pound was buoyed by rallying equities, bringing sterling off a day low of 1.5059.
  
• With no major economic announcements in the UK, investors waited for the announcement of US jobless claims figures in the afternoon. The data showed that during the preceding month 637,000 new Americans applied for unemployment benefit and 6.560 million continued to do so. Both these figures were larger than expected and suggested that the US is suffering more than some expected from recessionary pressures. As such the US dollar’s position was undermined and the pound was able to post further gains.
  
• Producer Price Index data was also released in the US and with volatile food and energy prices removed from the equation they stood 3.4% up on the day and in line with expectations.
  
• With the FTSE closing the day at 4,362.58, up 31.21, the pound continued to strengthen over a broadly weaker dollar as improved sentiment saw investors’ risk appetite improve.
  
• In today’s trading the pound continues to hold its ground as the market awaits the announcement of Consumer Price Index (CPI) data in the US at 13.30 BST. A key indicator for inflation, CPI data measures the changes of prices for a basket of goods in the US economy and investors are currently anticipating a 0.6% contraction on the year. A result significantly different to this will certainly see the pound/dollar rate move sharply.

Euro falls against the US dollar after German GDP data

The euro strengthened against the US dollar yesterday, but has begun losing ground this morning following worse-than-expected GDP data from Germany.

• In early trading yesterday the euro weakened against the dollar as general risk aversion returned to the market. Surprisingly weak US retail sales data released on Wednesday evening, together with the Bank of England’s gloomy outlook for the UK’s economic recovery, dissuaded investors from buying into perceived riskier currencies generally, with the euro suffering as a result.
  
• However, the euro recovered ground in the afternoon following small gains on equity markets, to finish the day slightly up against the dollar.
  
• But the euro has slipped against the US dollar this morning after data showed Germany's gross domestic product fell by 3.8 percent in the first quarter, more than had been expected. The Wiesbaden-based Federal Statistical Office says it is the biggest drop since it began tracking quarter-to-quarter growth in 1970. Forecasts had been for a drop of 3.0 percent on the quarter, seasonally adjusted.
  
• The number of new jobless claims in the US rose to a seasonally adjusted 637,000, from a revised 605,000 the previous week, the Labor Department said. The figures released yesterday exceeded analysts' expectations of 610,000.
  
• Other data yesterday showed US wholesale prices climbed 0.3 percent last month, larger than the 0.1 percent gain economists had expected. The biggest jump in food costs in more than a year offset a second monthly decline in the price of energy products.
  
• There are no significant data releases due from the UK today, while in the US the Consumer Price Index, Empire Manufacturing, Net Long Term TIC Flows, Industrial Production and University of Michigan Consumer Confidence figures are released this afternoon.

New Zealand dollar loses ground after worse-than-expected Retail Sales data

The New Zealand dollar lost ground to the pound overnight after NZ retail sales came in worse-than-expected.

• New Zealand ’s first quarter Retail Sales data fell by a record 2.9%, almost double analysts’ forecasts.
  
• This data will only serve to increase expectations that the Reserve Bank of New Zealand will cut rates further in order to try and revive the ailing economy.
  
• Support for the kiwi remains fragile as worries over the timing of the global economic recovery continue.

Australian dollar claws back some ground against sterling

The Australian dollar managed to claw back some of the previous day's losses against sterling yesterday, as the pound continues to be weighed down by a bleak economic outlook.

• Markets were given a sobering reminder of the difficult recover the UK economy is facing with Wednesday's BoE inflation report.
  
• The British central bank forecast inflation to go well under the banks target range while the economy is expected to recover at a slower pace than was originally thought.
  
• The aussie dollar, on the other hand, remains well supported as a recovery in equity markets yesterday increased risk appetite and demand for higher yielding currencies.
  
• However, the pound has regained some ground against the aussie dollar this morning, after investors sold the euro and bought the pound following worse-than-expected German GDP figures
  With no economic data due from the UK today direction is likely to be determined by broader market movements.

Euro falls after much worse than expected German GDP figures

The euro fell against the pound and the US dollar this morning after Germany released GDP figures which showed that the recession in the eurozone's largest economy is much deeper than expected.

The German first quarter GDP data, released at 7.00 BST this morning, showed a contraction of 3.8% quarter on quarter, compared with a forecast contraction of 3.0%.

Investors will now look to eurozone GDP data due at 10.00 BST today, and the euro may fall sharply if these figures mirror the German data.