Sterling continues its rise against the euro

Sterling continued its rise against the euro yesterday, finishing the day at 1.1315.

• In early trading yesterday the pound climbed against the single currency, as the FTSE 100 recovered from initial losses to record a 0.9% rise mid-morning.
  
• Sterling also gained on the back of Friday’s much worse-than-expected eurozone GDP figures, which revealed a 2.5% contraction in the region’s economy for the first three months of 2009.
  
• The pound’s early gains were also extended yesterday after more upbeat housing figures released by property website Rightmove. Following April’s 1.7% increase, this month saw a 2.4% rise in asking prices for homes in England and Wales, the largest monthly increase since February 2008, although the group did say it should not be mistaken for a housing market recovery just yet. Instead, it said the figures reflected a mixture of “ambition, optimism and necessity”.
  
• In the afternoon the pound continued to strengthen against the euro, as London equity markets rose markedly, driven by strength in banking stocks. News that Lloyds Banking Group chairman Sir Victor Blank would retire by June next year was welcomed by investors, with shares in the company finishing up 9.9% as a result. The FTSE 100 as a whole closed up 2.26%.
  
• In trading so far today the pound has continued its rise against the single currency, although investors are eyeing closely two important pieces of data released in the UK and eurozone later today.
  
• First, in the UK Consumer Price Index figures are due at 09.30 BST, shortly followed in the eurozone by the German ZEW Economic Sentiment Survey at 10.00 BST.

Sterling makes strong gains against the US dollar

The pound strengthened markedly against the US dollar yesterday, finishing the day at $1.5346.

• In early trading yesterday sterling climbed against the dollar, as London equity markets recovered from an initial 1% drop.
  
• Elsewhere, monthly figures from property group Rightmove aided sterling’s gains yesterday morning, as they showed asking prices in May rose by 2.4% in England and Wales, the biggest increase for the month since 2003.
  
• However, the group said it did not reflect a return to health of the country’s housing market, but rather a mixture of “ambition, optimism and necessity”. This capped sterling’s early gains to some extent.
  
• Strong performance by London equity markets yesterday afternoon drove sterling higher. Improved sentiment in the banking sector, following the decision of Lloyds Banking Group chairman Sir Victor Blank to retire next year, buoyed investor confidence that a global economic recovery was not too far off. As a result, many bought into the higher-yielding pound, moving away from the perceived safety of the dollar.
  
• In trading so far today the pound has continued its strong rise against the greenback, as general risk aversion in the market remains low.
  
• There are important economic releases due on both sides of the Atlantic today. In the UK, Consumer Price Index figures are out at 9.30 BST, while at 13.30 BST Building Permit data is due in the US.

Euro makes gains against US dollar as equities rise

The euro strengthened against the US dollar yesterday, finishing the day at $1.3560.

• In early trading yesterday the single currency weakened against the greenback, as investors continued to digest Friday’s much worse-than-expected first quarter eurozone GDP figures. They revealed a 2.5% contraction in the region’s economy for the first three months of 2009.
  
• Interestingly, comments from European Central Bank Governing Council member Axel Weber did little to stem the euro’s decline yesterday morning. He said the ECB had done enough to support the ailing eurozone economy unless the situation got noticeably worse.
  
• However, strong performance from global equity markets yesterday afternoon reversed early losses for the euro, as general risk appetite returned to the market. As a result, investors bought into the “riskier” single currency and sold the safe-haven of the greenback.
  
• The FTSE 100 finished the day up 2.26% at 4446.45, whilst the Dow Jones posted a healthy 2.85% rise to 8268.64. Strength in the banking sector in particular drove these gains.
  
• In trading so far today the euro has resumed its rise against the US dollar, as reduced risk aversion continues to sweep the market.
  
• There are major announcements due in both the eurozone and the US today. In the former, German ZEW Economic Sentiment Survey is out at 10.00 BST, whilst in the latter Building Permit figures are released at 13.30 BST.

New Zealand dollar holds its ground

The New Zealand dollar managed to hold its ground against sterling yesterday, as gains in equity markets and a reversal in risk aversion saw some support for the kiwi.

• Equities in the UK and the US rose yesterday, encouraging investors to buy back into riskier currencies like the New Zealand dollar.
  
• However, the kiwi’s support will remain tentative given the country's ongoing economic woes.
  
• Markets are likely to wait for further economic data, which may give further clues to the recovery process of the world economy, before giving the kiwi further support.

Australian dollar recovers ground on stronger equity markets

The Australian dollar strengthened back against sterling yesterday, as risk appetite came back into favour due to rising equity markets.

• With little economic news yesterday, positive remarks from many of the world’s top central bankers saw demand for higher -yielding currencies rise.
  
• The aussie dollar was also supported overnight by the release of the RBA minutes from their last meeting. The wide range of economic data considered by the Board generally pointed to some improvement in confidence and economic activity, and investors now believe the Reserve Bank has concluded its dramatic sequence of rate cuts.
  
• This morning inflation and retail figures will be released in the UK, marking the start of a series of UK data due out over the next few days. This will be important to the near-term direction of the pound.

Pound strengthens against the euro following eurozone GDP figures

The pound strengthened against the euro on Friday, finishing the day at 1.1246.

• A set of grim economic figures in the eurozone weighed on the single currency all day on Friday, as investor confidence that a recovery in the region may soon be underway diminished.
  
• German GDP data showed the country’s economy had contracted by 3.8% in the first quarter of 2009, the largest drop since the country started compiling quarterly data in 1970.
  
• Moreover, GDP in the eurozone fell by a much larger-than-expected 2.5% in the period, much faster than the US slowdown. Following a 1.6% contraction in the 16-country region in the final three months of 2008, Friday’s figure deepened what was already the worst recession in continental Europe since World War II.
  
• Sterling therefore gained on the view that whilst the UK economy remains weak, it appears the eurozone economy may be in worse shape, and could take longer to recover from the downturn. As a result, investors bought into the pound, dumping the single currency.
  
• In trading so far today the pound has continued its rise against the euro, as investors remain wary about buying into the single currency following Friday’s data.
  There are no major economic announcements due in either the UK or eurozone today.

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.