Sterling finishes slightly down against single currency

Sterling touched a 5-week low against the single currency in early trading yesterday before recovering late in the day to finish just a quarter of a cent down.

• The pound came under selling pressure in early trading as equity markets in Europe opened lower than Friday.
  
• Investors were initially concerned about the economic prospects facing the global economy at present, however these concerns soon abated as risk appetite returned to markets.
  
• The FTSE 100 ended the day 1.8% higher, boosted in particular by stronger mining and energy stocks.
  
• In early trading today the FTSE 100 is marginally up, boosted by economic news released overnight. The Royal Institute of Chartered Surveyors released better-than-expected news about the housing market, their reading the best since September 2007.
  
• The British Retail Consortium has also revealed much better-than-expected retail sales figures, boosted by the hot weather in June.
  
• Investors will take note of inflation figures released in the UK this morning and the ZEW economic sentiment survey out in Germany.

Sterling strengthens after equities rally

Sterling strengthened against the dollar yesterday by 0.15 cents (0.09%) finishing the day at $1.6225.

• Sterling weakened further against the dollar in early trading yesterday, following the news that Lloyds Plc is likely to announce further losses in its first half earnings report. The news was reported by the Sunday Times from an unknown source and could be as much as £13 billion.
  
• However losses were limited as stock markets rallied, in particular in the US following comments made by analyst Meredith Whitney who stated that investors should buy shares in Goldman Sachs and that banks are likely to improve their earnings by 15%.
  
• Jobless claims data due in the UK tomorrow will be of particular importance as it is expected to show an increase in claims in June from the May forecast. This may have an adverse effect on sterling.
  
• There are several significant announcements due in the UK today, including Consumer Price Index and Retail Price Index at 09.30 BST. If the results are weaker than expected then that may result in the Bank of England extending their quantitative easing plan and possibly further weakening the pound. In the US, Producer Price Index and Retail Sales data will be of most significance, when they are released at 13.30 BST.

Euro strengthens after risk appetite returns

The euro strengthened against the US dollar by 0.41 cents (0.29%) yesterday to close the day at $1.3975.

• Initially, the single currency headed lower yesterday as stuttering equity markets continued to hamper risk appetite in the market. However, they later picked up, spurring the euro’s gains yesterday afternoon.
  
• In addition, news that the Japanese government had upgraded its economic outlook for the third consecutive month provided additional momentum to “riskier” currencies as investors looked beyond the perceived safety of the greenback.
  
• Finally, the news that the US Federal Budget Balance was ahead of forecast at -$94.3 billion also spurred movement away from the dollar yesterday evening. The reading was a significant improvement on June’s reading of -$189.7 billion, as well as slightly above analyst predictions of -$95 billion this month.
  
• There are major announcements due in both the eurozone and US today. In the former, German ZEW Economic Sentiment data is out at 10.00 BST, whilst in the latter, Retail Sales and PPI is due at 13.30 BST.

Aussie heads higher against GBP

The pound weakened against the Australian dollar yesterday, losing a cent to finish the day at 2.0714.

• The Australian dollar recovered some ground yesterday as a rise in US stocks gave the riskier currency a boost.
  
• However, trading was choppy yesterday as sentiment remains fragile at the moment, with markets speculating that recent optimism was overdone.
  
• The aussie gained further ground against the pound overnight, as the Australian currency was supported by stronger business data.
  
• The National Australia Bank Business Conditions report climbed by 12 index points to -2, taking it back to the level before the collapse of Lehman Brothers in September last year.

Kiwi strengthens after markets rally

Sterling weakened against the New Zealand dollar yesterday, losing almost 2 cents to finish the day at 2.5653.

• The pound made small gains against the New Zealand dollar early yesterday, but fell sharply in the afternoon as Wall Street staged a morning rally amid hopes that US corporate earnings may not be as weak as expected.
  
• The rise in US equities increased demand for riskier currencies, offering the New Zealand dollar some support.
  
• However, the kiwi has weakened a little this morning as investors brace for earnings reports from the US, including an important one from Goldman Sachs.

Sterling slightly down on Friday after rough week

Sterling weakened by 0.17 cents (0.15%) against the euro on Friday to close the day at 1.1631.

• The UK trade deficit narrowed to a three-year low in May with a goods deficit of £6.3bn which will provide some underlying support for sterling, although the impact was limited.
  
• As expected, the Bank of England left interest rates on hold at 0.50% following the latest MPC policy meeting. The central bank also announced that their quantitative easing programme would remain at £125bn, contrary to some speculation that the amount of bond buying would be increased and this provided an immediate boost to sterling last week.
  
• The bank announced that there would be a review at the August meeting when the latest inflation report will be available. There will continue to be some expectation the bank will increase the bond buying next month and this will tend to prevent any substantial improvement in sentiment.
  
• The ECB stated last month commercial banks in the 16-nation euro region may lose a further $283 billion by the end of next year as the financial crisis forces them to write off bad loans.
  
• It is anticipated that European Central Bank President Jean-Claude Trichet will today state that interest rates will not be cut at the ECB’s next meeting.
  
• The ECB said in its monthly report last week that interest rates are “appropriate” and the eurozone’s economy will gradually get out of the recession in 2010. The region’s interest rate remained unchanged at 1% on July 2 in order to improve economic growth in the eurozone.

Pound dragged down by falling equities

The pound weakened against the US dollar on Friday, losing more than a cent as falling equities made investors more risk-averse.

• The pound made strong gains against the US dollar on Thursday after the Bank of England shocked markets by announcing it would leave its quantitative easing programme at £125bn.
  
• But the pound began falling against the dollar on Friday, as the greenback gained support from falling equity markets and worries about upcoming US corporate earnings figures.
  
• British shares hit a 10-week low on Friday, undermined by falling oil prices and a downbeat earnings outlook from US oil company Chevron Corp.
  
• The pound has continued falling broadly this morning, losing another 1½ cents to the US dollar as the British currency comes under broad selling pressure amid struggling equities and growing risk aversion.

Euro weakens vs. US dollar as risk appetite wanes

The euro weakened by 0.84 cents (0.60%) against the US dollar on Friday to finish the day at $1.3934.

• In trading on Friday, the euro weakened against the dollar following the onset of the US corporate earnings season. This contributed to a growing sense of unease about the global economic recovery, reducing appetite for riskier currencies like the euro.
  
• Further falls in equity markets, commodities and emerging market currencies also weighed on the single currency, as did cautious comments on the global outlook from the IMF and G8 meeting in Italy.
  
• However, the euro’s falls were stemmed to some extent as investors took heart from Wednesday’s German industrial output figures released earlier in the week. They suggested the eurozone may hold up better than many had feared.
  
• In addition, monthly French industrial production also came in stronger-than-forecast on Friday, registering at 2.6% from -1.5% last month and ahead of analyst forecasts of -0.1%.
  
• There are no major announcements due in the eurozone today, whilst in the US the Federal Budget Balance is due at 14.00 BST.

Sterling finishes the week down vs. aussie

Last week ended with sterling losing 45 cents against the Australian dollar, as traders booked profits ahead of the weekend.

• Nevertheless, last week was very good for the pound as it gained nearly four cents against the Australian dollar as the recent cooling in commodity prices took its toll on the Aussie.
  
• Friday proved to be quiet for GBP/AUD trading as investors were wary of taking on too much risk – the pound was not helped as the FTSE 100 had a sluggish day.
  
• In early trading today, the pound is under broad selling pressure as equity markets remain under pressure. This week could prove to be volatile as key economic data is released out of America.

Sterling finishes down against kiwi

Sterling came under selling pressure against the New Zealand dollar on Friday, losing over a cent in value during trading.

• Last week still proved to be positive for the pound as it gained 2.56 cents against the kiwi, as the commodity based New Zealand currency came under increased selling pressure.
  
• In early trading today the pound is trading in a narrow range against the kiwi as equity markets in Asia struggled overnight. Retail sales data was also released in New Zealand late last night, coming in ahead of consensus.
  
• Economic data is light on the ground within the UK today, so expect trading to take its lead from equity market movements.