Sterling weakens slightly against euro on Friday

The pound weakened slightly against the euro on Friday by 0.05 cents (0.04%) to close the day at 1.1430.

• In early trading on Friday, the pound strengthened slightly against the euro after better-than-expected UK housing data buoyed investor hopes that an economic recovery in the UK may soon be underway. Nationwide’s survey showed UK house prices unexpectedly rose 1.2% during April.
  
• Strong London equity market performance also contributed to sterling’s gains early on, with the FTSE up 1.2% mid-morning.
  
• However, profit taking capped sterling’s gains mid-afternoon. In addition, the GfK/NOP UK consumer confidence survey hampered the pound’s progress as it came in at -27 for the second month in a row, ending three months of consecutive gains. As a result, sterling finished slightly down on the day.
  
• In trading so far today, the pound has strengthened against the single currency as investors eye important data and interest rate announcements out this week.
  
• There are no major announcements due in the eurozone today, however at 09.30 BST in the UK, Manufacturing PMI data is out.

Sterling finishes May on a high

The pound strengthened considerably against the US dollar on Friday, finishing the day up 2.44 cents (1.53%) at $1.6187.

• In early trading on Friday, sterling rose to a near seven-month high against the greenback as signs the global recession may have passed its worst prompted investors to seek riskier assets.
  
• Earlier worries surrounding the US government’s triple-A credit rating also subsided mid-morning on Friday after a series of successful US Treasuries auctions indicated healthy demand for US debt.
  
• Better-than-expected UK housing data released by Nationwide also buoyed appetite for the riskier pound on Friday morning. Its survey showed house prices rose by 1.2% in April.
  
• However, weaker-than-forecast US Preliminary GDP figures released mid-afternoon cooled the pound’s rally to some extent. This month’s reading of -5.7% was worse than the -5.5% analysts had been expecting, although it did represent an improvement on the -6.1% the month before.
  
• Nevertheless, the pound posted a considerable increase against the greenback over the day, capping an impressive 8.5% rise against the US currency in May.
  
• In trading so far today, the pound resumed its rise against the dollar as improved risk sentiment in the market continues.
  
• In the UK, Manufacturing PMI figures are due at 09.30 BST, whilst at 15.00 BST in the US, ISM Manufacturing PMI data is out.

Euro finishes strongly up against the US Dollar on Friday

The euro strengthened considerably against the US dollar on Friday by 2.15 cents (1.54%), finishing the day at $1.4158.

• In early trading on Friday, the euro hit its highest level against the greenback since early January after improved risk appetite swept the market. In particular, healthy demand for US debt after a series of successful US Treasuries auctions aided the single currency’s gains.
  
• Strong rises on European equity markets also weakened demand for the safe-haven of the dollar as investor demand for riskier assets increased.
  
• However, weaker-than-expected Preliminary GDP figures out in the US mid-afternoon tempered risk appetite in the market to some extent. This month’s reading of -5.7% was a slight improvement on the -6.1% the month before but much worse than the -5.5% analysts had forecast.
  
• Nevertheless, the euro still finished well up against the dollar on the day, closing at its highest level since 18 th December last year and marking an impressive 6.7% rise in May.
  
• In trading so far today, the single currency has resumed its rise against the greenback as improved risk sentiment continues to sweep the market.
  
• There are no major announcements out in the eurozone today, whilst in the US, ISM Manufacturing PMI figures are due at 15.00 BST.

Aussie stregthens against sterling

The pound lost ground to the Australian dollar on Friday, and continued to fall over the weekend.

• Sterling ’s fall came on the back of improving risk appetite and rising commodity prices, both of which boosted demand for the aussie dollar.
  
• The flow of information from the US, Japan, Europe and the UK continues to suggest that the intensity of the recession is easing.
  
• Oil closed above $US66 a barrel on Friday, up more than 100% from its lows five to six months ago, and copper prices also rose strongly.
  
• Also, another reason for the rise in the Australian dollar is the return of the carry trade: US investors are selling the US dollar to buy the Australian dollar and get returns well above what they can get in the States.

Kiwi finishes Friday up against the pound

The New Zealand dollar made gains against the pound on Friday, and continued to gain ground overnight as risk appetite improved.

• Growing optimism boosted appetite for risk, improving demand for higher yielding currencies, with the kiwi and the aussie dollar being major beneficiaries.
  
• The kiwi hit new multi-month highs against the US dollar and the euro overnight, and remained well supported against the pound.
  
• Rising commodity prices and renewed interest in carry trades also offered the New Zealand dollar some support.

Euro hits highest level against US dollar this year

The euro hit its highest level against the US dollar since New Year's eve today, as improved risk appetite swept the market. In particular, strong demand for US debt after a series of successful US Treasuries auctions aided the single currency’s rise.

In addition, healthy rises on European equity markets also weakened demand for the safe-haven of the dollar as investor demand for riskier assets increased.

Kiwi stregthens on back of budget

The New Zealand dollar rose broadly yesterday, after the government budget caused ratings agency Standard and Poor’s to revise its outlook on New Zealand's credit rating, from "negative" back to "stable".

• This was a big reprieve for the kiwi, and was largely due the government’s decision to scrap tax cuts in a broader debt reduction plan.
  
• The government also stated that it did not expect the economy to return to growth until the last quarter of this year.

Aussie rebounds against sterling

The Australian dollar rebounded against sterling yesterday, after the disclosure of Britain's financial regulators’ “stress tests” on banks caused renewed jitters in the markets over the health of the UK financial sector.

• The results had many in the market reassessing their views about the UK's banking sector’s ability to cope with a sustained economic downturn.
  
• Sterling was also weighed down by retail sales data, which revealed a bigger than expected fall in sales for April. Retailers are expecting further falls next month.
  
• This is perhaps a reminder that, despite optimism from some areas that the UK economy may be bottoming out, there is almost certainly going to be further weak economic data over the next few months.
  
• At the moment optimism versus economic reality is likely to perpetuate further volatility.

Euro finishes up against the US dollar

The euro strengthened against the US dollar yesterday by 1.19 cents (0.86%), closing the day at $1.3943.

• In early trading yesterday the euro strengthened against the greenback, as investors bought back into the riskier single currency following recent falls.
  
• Appetite for the riskier euro was also bolstered after the release of better-than-expected Core Durable Goods data in the US. It came in at 0.8%, a considerable improvement on the -2.7% registered last month, and way ahead of the -0.4% expected. Elsewhere, US Unemployment Claims figures also improved global risk sentiment after it came in at 623k for May, well ahead of the 628k forecasted, and the 636k reading the previous month.
  
• However, weaker-than-forecast US New Home Sales data capped the euro’s gains to some extent after it came in at 352k this month, well below the 363k expected, but slightly up on the 351k recorded in April.
  
• In trading so far today the euro has risen back above the psychological $1.40 level, as appetite for safe-haven currencies like the greenback continues to subside.
  
• There are no major announcements due in the eurozone today, whilst at 13.30 BST in the US Preliminary GDP (QoQ) figures are out.

Pound finishes slightly down vs. greenback

The pound weakened slightly against the US dollar by 0.1 cents (0.06%) yesterday, to finish the day at $1.5943.

• Sterling weakened against the greenback in early trading yesterday, after Bank of England Monetary Policy Committee member David Blanchflower was quoted as saying investors should not take the pound’s recent rally as proof the global recession has bottomed out: “My worry is that there can be many false dawns and we shouldn’t just assume that everything is over.”
  
• Adding to the downward pressure on the pound mid-morning was the release of weaker-than-forecast CBI figures, which came in at -17 for May, much lower than the -10 analysts expected, and a considerable fall from the 3 registered last month, although this figure may have been skewed due to a late Easter.
  
• However, the pound’s losses were capped to some extent following the release of better-than-expected Core Durable Goods and Unemployment Claims data in the US. The former came in at 0.8%, a considerable improvement on the -2.7% registered last month, whilst the latter registered at 623k, well ahead of the 628k analysts had been forecasting.
  
• However, surprisingly weak US New Home Sales figures halted sterling’s fight back mid-afternoon, after it came in at 352k this month, well below the 363k expected. Nevertheless, the pound only finished slightly down on the day.
  
• In trading so far today the pound has strengthened against the dollar, rising back above the $1.60 level as positive sentiment about the UK’s chances of economic recovery continues.
  
• There are no major announcements due in the UK today, however in the US Preliminary GDP (QoQ) figures are due at 13.30 BST.