Sterling strengthened vs. single currency yesterday

The pound strengthened against the euro by 0.38 cents (0.33%) yesterday to finish the day at 1.1385.

• In early trading yesterday sterling strengthened against the euro, after news that Germany’s financial regulator BaFin had warned that toxic debt of the country’s banks would explode “like a grenade” unless they accepted government bad-bank plans to prepare for the next phase of the crisis.
  
• The pound’s gains were extended yesterday afternoon after London equity markets pared early losses to head into positive territory. The shortage of economic data out in the UK this week means that investors are likely to take their lead from equities for the foreseeable future. The FTSE 100 eventually finished the day up 46.43 points at 4411.72.
  
• In trading so far today sterling has continued its rise against the single currency after Asian stocks hit their highest level in more than seven months overnight.
  
• There are no major announcements due in UK or eurozone today.

Sterling finishes down against the euro

The pound weakened against the euro yesterday by 0.35 cents (0.31%), finishing the day at 1.1347.

• In a quiet day’s trading because of the UK Bank Holiday, the euro strengthened against sterling on Monday as some investors took advantage to push sterling lower.
  
• This move came despite worse-than-expected German Ifo Business Climate figures, which revealed a rise to just 84.2 this month from 83.7 in April, well below the 85.1 analysts had predicted.
  
• On Friday, the pound weakened against the euro after Thursday’s announcement that a ratings agency had lowered its UK outlook from “stable” to “negative” reduced investor appetite for the UK currency.
  
• Standard & Poor’s justified their decision to lower its rating based on the fact that UK government debt could near 100% of GDP. Sterling’s fall came despite S&P affirming that they were not looking to cut Britain’s ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings.
  
• Elsewhere, data released on Friday morning showed the UK economy contracted an unrevised 1.9% in the first three months of the year.
  
• In trading so far today, the pound has pared all of Monday’s losses against the euro after a report in The Daily Telegraph revealed that German regulator BaFin had warned that toxic debt of the country’s banks would blow up “like a grenade” unless they took advantage of government bad-bank plans to prepare for the next phase of the crisis.
  
• There are no major announcements due in the eurozone or UK today.

Pound weakens slightly against US dollar in quiet trading

The pound weakened against the US dollar yesterday by 0.28 cents (0.18%), closing the day at $1.5906.

• In a light day’s trading because of the public holiday in both the US and UK, sterling weakened slightly against the greenback as some investors booked profits from last week’s healthy rise.
  
• In early trading on Friday, the pound continued its rise against the dollar after concerns surrounding the US’s triple-A sovereign credit rating surfaced. On Thursday, rating agency Standard & Poor’s downgraded its UK outlook from “stable” to “negative”. This sparked broad selling of American stocks and bonds on Friday as fears that record US deficits could lead to a similar downgrade.
  
• Another ratings agency, Moody’s, added to the downward pressure on the greenback after it admitted that although it was comfortable with its triple-A sovereign rating for the US at the moment, it was not guaranteed forever.
  
• In trading so far today, the pound has continued its slide against the dollar as investors await US Treasury auctions to test the strength of market appetite for dollar assets.
  
• There are no major announcements due in the UK today, whilst in the US CB Consumer Confidence data is released at 15.00 BST.

Euro posts small gains against US dollar in light trade

The euro strengthened by 0.17 cents (0.12%) against the US dollar yesterday, finishing the day at $1.4013.

• In a quiet day’s trading because of the American public holiday, the euro strengthened slightly against the greenback as risk appetite in the market continued.
  
• In early trading on Friday, the single currency strengthened against the dollar after investors speculated that the US’s sovereign rating could be downgraded by ratings agencies. Standard and Poor’s decision on Thursday to cut its UK outlook from “stable” to “negative” led many to question which other major nations were susceptible to downgrades.
  
• Although another agency, Moody’s, said it was happy with the US’s ratings at the moment, investors still speculated that it could suffer a downgrade because of its government’s high levels of borrowing. This sent the euro into positive territory against the dollar as investors sold off US assets.
  
• In trading so far today, the euro has weakened against the dollar following news that German regulator BaFin had warned that toxic debt of the country’s banks would explode “like a grenade” unless they took advantage of government bad-bank plans to prepare for the next phase of the crisis.
  
• There are no major announcements due in the eurozone today, whilst at 15.00 BST in the US CB Consumer Confidence data is out.

New Zealand dollar remains well supported

The New Zealand dollar remained well supported against both sterling and the aussie yesterday, as markets awaited the release of a host local economic data, starting with Trade Balance figures released overnight.

• New Zealand Trade Balance data revealed a third consecutive monthly trade surplus in April, while the annual deficit narrowed to NZ$4.1 billion.
  
• This could be the start of a volatile period for the kiwi, with events culminating in the government’s budget on Thursday.
  
• Pressure remains on the government to produce a balanced budget which will appease ratings agencies. Failure to do so may threaten the country’s AA+ credit rating, which would put further pressure on the kiwi.

Australian dollar trades within recent ranges

The Australian dollar traded within recent ranges against sterling yesterday, as a public holiday in the UK kept trade thin.

• Recent optimism over the possible recovery of the world economy, and the subsequent rise in risk appetite, are now starting to dwindle.
  
• More positive economic data to support the view that the world economy is recovering significantly is likely to be needed to extend demand for riskier assets.
  
• If positive data is not forthcoming then the optimism that has supported the aussie in recent weeks could diminish further, undermining the higher yielding currency.

Euro strengthens against the greenback

The euro strengthened against the US dollar by 1.51 cents (1.11%) yesterday, finishing the day at $1.3779.

• In early trading, the euro strengthened against the dollar as improved risk sentiment in the market stoked demand for riskier currencies.
• News that a strong euro had not been a concern among European finance ministers further extended the single currency’s gains yesterday lunch. Portuguese Finance Minister Fernando Teixeira dos Santos’s comments sent the single currency into positive territory after he said the European Union was not concerned about the strength of the single currency.
• Strong performance from European equity markets also stoked the euro’s gains as investors looked to the riskier single currency, and away from the perceived safe-haven of the dollar.
• The dollar plunged in late trading yesterday afternoon after US Treasury secretary Tim Geithner said the financial system was “starting to heal” following a period of severe trauma. His comments further stoked investor confidence that a global economic recovery may tentatively be underway, with riskier currencies like the euro benefitting as a result.

Pound on course for biggest monthly rise vs. USD since 1993

The pound continued to strengthen against the US dollar yesterday, rising 2.79 cents (1.8%) to finish the day at $1.5754.

• In early trading, sterling resumed its rise against the greenback as risk aversion in the market continued to diminish, prompting investors toward riskier assets.
• The pound continued its climb following the release of Bank of England minutes. They showed the MPC unanimously agreed to expand the bank’s asset purchase program by a further £50 billion, although a £75 billion extension was discussed. The fact there were no unpleasant surprises was greeted with relief on the markets.
• Meanwhile, figures released by the Confederation of British Industry showed UK manufacturing orders fell slightly more than expected last month but firms were more upbeat about the future than at any time since last September. This news further extended sterling’s gains.
• A move beyond sterling’s 200-day moving average of $1.5550 – a key technical level – further extended its gains yesterday afternoon.
• Finally, in late trading, comments from US Treasury secretary Tim Geithner that the financial system was “starting to heal” after a period of severe trauma further increased investor appetite for riskier currencies like the pound. His announcement boosted confidence that the worst of recession had passed, tempering safe-haven demand for the dollar.
• The pound has risen 5.6% against the greenback so far this month, leaving it on course for its biggest monthly rise since 1993.
• The pound’s rise has continued in trading so far today as general risk aversion continues to wane in the market.

Sterling strengthens against the single currency

The pound strengthened against the euro by 0.8 cents (0.7%) yesterday, finishing the day at 1.1430.

• In early trading, the pound strengthened against the single currency as pessimism surrounding the UK economy and financial sector eased.
• Adding to the euro’s early dip was the release of worse-than-expected German producer price data, which showed a 1.4% fall in April from the previous month, the sixth monthly decline.
• The release of Bank of England minutes from their last policy meeting, in which they decided to extend their asset purchase program by a further £50 billion, was greeted with relief on the markets mid-morning after it produced no big surprises. The MPC voted unanimously to expand its quantitative easing although, interestingly, they did discuss the possibility of a £75 billion extension.
• However, by lunch the euro had clawed back all of its early losses against the pound as traders booked profits from the previous day’s gains.
• Comments made by Portuguese Finance Minister Fernando Teixeira dos Santos sent the single currency into positive territory after he said a strong euro had not been a concern among European finance ministers. A pull-back in continental equities from session lows also helped to increase risk demand in the market, with the euro again benefitting as a result.
• A downbeat report released by the International Monetary Fund yesterday afternoon further weighed on the pound after it said any recovery in the British economy is likely to be subdued. It also warned that the UK’s high levels of borrowing and the fragility of its financial sector make it susceptible to potential shocks.
• Nevertheless, in late trading the pound eventually clawed back into positive territory against the single currency, as investors remained wary that the eurozone may still have some way to go before its recession bottoms out, with last Friday’s downbeat GDP figures still weighing on many minds.

Pound strengthens against the euro

The pound strengthened against the euro by 0.35 cents yesterday, finishing the day at 1.1350.

• In early trading yesterday the pound strengthened against the euro, following news that UK Financial Investments (UKFI), which manages the UK government’s stakes in RBS and Lloyds Banking Group, had sounded out investors who may be interested in buying some of its holdings in the part-nationalised lenders.
  Sterling’s gains were also aided by continued strength on London equity markets, with the FTSE up 0.5% in early trade.
  
• However, the pound’s early gains were capped after the release of Year-on-Year Consumer Price Index data mid-morning. April’s reading of 2.3% was worse than the 2.4% forecast and the 2.9% recorded in March, prompting some investors to question the UK’s chances of a timely economic recovery.
  
• Elsewhere, much better-than-expected German ZEW Economic Sentiment figures released in the eurozone also allowed the euro to claw back some of sterling’s early gains. It registered at 31.1 for May, far ahead of the 20.0 analysts had forecast and the 13.0 recorded last month.
  
• After a solid day’s trading, London equities lost steam late on, causing the pound to weaken off slightly. The FTSE 100 finished the day up 0.8%.
  
• So far today sterling has resumed its rise against the single currency, as the deep pessimism surrounding the UK’s economic recovery continues to ease.
  
• There are no important economic announcements due in the eurozone today, however in the UK the Bank of England are releasing the Minutes from their last policy meeting at 09.30 BST.