The pound posted strong gains vs kiwi on the back of rising risk aversion

Sterling hit a 6-day high against the kiwi yesterday as a sharp spike in risk aversion hurt sentiment toward the higher-yielding currency.

• Sterling initially fell by another half cent against the kiwi yesterday following surprisingly weak economic data emerging from the UK.
  
• However, the pound recovered its losses in the afternoon to close at 2.3926, up 0.7%, as investors sold off riskier currencies in light of falling global stock prices.
  
• Leading stock indices in Europe and the US fell by nearly 2% as traders withdrew from risk activity sparking concern over the pace of the global economic recovery.
  
• Analysts said that there was little substance to cause the risk aversion and that it was more the psychology of the market deciding to turn.
  
• In trading this morning, the kiwi has pared its losses, with the pairing now trading 0.2% lower than yesterday’s close.

Aussie regains value on strong growth rate of 0.6%

Sterling gained nearly 3 cents (1.3%) against the aussie yesterday, following cautionary words from the Reserve Bank of Australia.

• Sterling made strong gains against the aussie yesterday with the RBA’s dovish statement outweighing weak economic data in the UK.
  
• The RBA at their latest meeting held interest rates at 3.0%, which, although an expected decision, was accompanied by a statement that said the low rate was appropriate, countering more aggressive speculation.
  
• Those investors that had aggressively priced in the idea that Australia would increase rates trimmed their holdings putting selling pressure on the aussie and enabling the pound to close at 1.9553.
  
• However, data released this morning revealed that Australia’s economy expanded at a higher rate than expected in the second quarter, which has driven the pound back down in trading this morning.
  
• The 0.6% growth exceeded the 0.3% forecast and has strengthened demand for the aussie, with sterling already down 0.75% on yesterday’s close.

Euro plummeted 0.8% vs US dollar on falling global stocks

The single currency plummeted 0.8% against the greenback yesterday as falling global equities supported risk aversion.

• The dollar firmed substantially against the single currency yesterday, as falling European share prices were followed in the US indices’, prompting investors to shed perceived riskier currencies.
  
• The single currency lost nearly half a percent in just 25 minutes as investors dumped the euro, which closed the day at 1.4222.
  
• Stock markets in Europe were undermined by a combination of ongoing fears that recent bullish sentiment has overcompensated for the economic improvement to date.
  
• The euro fell despite some moderately bright data released in Germany, however this was offset by a rising unemployment rate in the eurozone, which has now hit 9.5%.
  
• The pairing is relatively unchanged this morning as traders await data released in the US this afternoon which should give a good indicator of current economic health.

A sharp fall in equities yesterday saw the pound tumble vs dollar

Sterling dropped over a cent to its lowest point in 6 weeks against the greenback yesterday following a combination of falling equity prices and weak economic data.

• The pound erased early gains against the greenback yesterday after an unexpected dip in UK manufacturing activity in August, stoking concerns about the pace of the recovery in the British economy.
  
• Many analysts thought the data represented only a temporary setback for a recovery, given the continued support of stimulus spending, but investors appeared more concerned about the implications for interest rates and monetary policy.
  
• Sterling also came under pressure in the wake of poor equity prices which failed to follow the rally in many of the Asian stocks.
  
• Additionally, in the US, data was revealed that the manufacturing industry expanded for the first month in over a year, producing a figure of 52.9. The figure failed to have a positive effect on sterling, which closed the day at $1.6157.
  
• In the US today, there is a string of economic data released, including non-farm employment change at 13:15BST.

A rise in risk aversion yesterday helped sterling par its losses vs euro

Sterling pared its losses yesterday to close the day just 0.05% down at 1.1358.

• Sterling suffered another setback against the single currency yesterday, relinquishing early gains following the release of weak manufacturing figures that came in below forecast.
  
• UK manufacturing PMI dropped to 49.7 in August from 50.2 in July, against market expectations of further recovery to levels around 52.0.
  
• Additionally consumer lending declined in July for the first time since records began in 1993 falling by £600m in July from a revised £200m increase in June.
  
• This unexpected data cast further doubts on the prospects of an improvement in the UK economy and a rise in interest rates, putting selling pressure on the pound.
  
• However, some analysts have said that the worst is probably over for the pound, with data yesterday also showing signs of improvement in the housing market as mortgage approvals rose to their highest levels in 15 months.
  
• In the UK today, figures are released at 09:30BST on the construction industry with forecasts predicting another contraction, whilst in the eurozone their revised GDP figure will be released at 10:00BST.

Pound makes marginal gains vs kiwi following a decline in risk appetite

Dulled risk sentiment for higher risk currencies yesterday slowed the pound’s rate of decline against the New Zealand dollar, closing the day yesterday at 2.3768.

• Having made gains of 0.4% against the kiwi on Friday, the pound declined marginally in trading yesterday.
  
• However, the rate of decline was much diminished from last week, with the pound only losing 0.013 of a cent in yesterday’s trading.
  
• Following the RBA’s statement, the New Zealand dollar has also suffered slightly as risk appetite for higher-yielding currencies took a step back.
  
• As there is little data emerging from New Zealand’s central bank until there monetary policy statement on September 10 th, analysts have said that it will take a change in international sentiment toward risk to alter the kiwi current range.
  
• Indeed, the pound has begun gaining ground in trading so far this morning, recovering 0.12%.

Sterling gains vs aussie following dovish RBA statement

Having continued to lose ground on Friday, the pound has reversed the trend, following the RBA statement in the early hours of this morning.

• With European stocks and oil prices up on Friday, investors’ appetite for risk supported high-yielding currencies like the aussie.
  
• Sterling continued to lose ground yesterday following as investor sentiment was buoyed by the positive news emerging from the Japanese election and the corresponding improved Asian equities.
  
• The Australian dollar as capped its gains this morning however after the Reserve Bank of Australia said current monetary policy was still appropriate and left interest rates unchanged at 3.00%.
  
• Investors had widely expected the RBA to sound more hawkish, but their comments allowed the pound to recover, which is up over half a percent on the day.

Decline in stock prices, devalues the euro vs the US dollar

The single currency reversed early gains against the greenback following a decline in investor sentiment for "risker" currencies.

• The single currency lost ground on Friday as both the unemployment rate and the CPI flash estimate figures came in below expectations, reminding investors not to over-estimate the pace of the eurozone’s recovery.
  
• In trading yesterday, the euro was able to regain all the ground lost against the greenback, as inflation rates increased from -0.7% in July to -0.2% in August.
  
• The euro has failed to realise these gains agains today, with the single currency currently trading 0.15% lowers, as a decrease in European equity value erodes investment sentiment in the market.
  
• The eurozone unemployment rate was released today at 10:00BST, which revealed that unemployment remained at a high of 9.5% this month, which added selling pressure to the single currency.
  
• In the US, data on the manufacturing industry and home sales is released at 15:00BST.

Dollar recovers Bank Holiday losses following weak UK data

The pound made marginal losses against the greenback over the Bank Holiday, to close the day at $1.6288.

• Sterling traded marginally higher on Friday morning as data bolstered hopes that the UK will return to growth in the current quarter by reporting that the economy contracted by 0.7% between April and June, not 0.8% as previously stated.
  
• However, the greenback recovered its losses to close the day marginally up, as risk appetite was hindered by slightly weaker-than-expected consumer spending figures emerged from the US.
  
• Although trading was closed in London yesterday, sterling received a boost from robust gains in world stocks, resulting in improved risk appetite.
  
• In trading this morning, sterling has erased early gains against the greenback as investor sentiment was discouraged by weak UK manufacturing data and is currently trading at 1.6231.
  
• Demand for sterling could continue today if a US Manufacturing PMI produces a figure above 50, as predicted, which would indicate industry expansion and support risk sentiment. There is also important US home sales data released at 15:00BST today.

Pound fails to capitalize on Friday's gains vs the euro

Sterling failed to capitalise on gains made on Friday as investors remained cautious of overestimating the UK’s revised GDP figure.

• Sterling inched up on Friday after figures showed that the UK economy contracted at a slightly slower rate in the second quarter than initial estimates.
  
• The 0.1% revision, although better-than-expected, had a very limited effect on the pound, with investors remaining cautious following previous weak business investment data.
  
• Analysts warned that the small improvement did not obscure the severity of the UK recession and the challenges still facing the economy.
  
• Additionally, traders were hesitant to take on significant positions in the currency ahead of the Bank Holiday.
  
• In trading yesterday, the pound held steady against the single currency to close the day marginally down at 1.1364.
  
• Sterling started to recover its losses against the euro this morning following relatively unimpressive German retail sales figures which dulled support for the currency.
  
• However, worse-than-expected data released about the UK manufacturing sector at 09:30BST has hurt the pound, which is currently trading 0.23% down for the day.