Sterling relinquishes gains posted yesterday vs kiwi as risk aversion abates

The pound continued to post strong gains against the New Zealand currency yesterday, regaining another 1.0% to close at 2.4157.

• Equity markets continued to trade in the red yesterday which put selling pressure on “riskier” assets, driving the kiwi lower.
  
• Additionally, data in the US revealed that job losses were still high, far more than had been expected, with the ADP non-farm employment change producing a figure of 298K for August, which further hindered the kiwi’s progress.
  
• In the UK, an improved figure for conditions in the construction industry brought relief from a string of negative economic data, encouraging demand for the pound.
  
• However this morning sterling has started to relinquish its gains part due to a rebound in Chinese shares that eased aversion to riskier, higher-yielding currencies.

Sterling capped it gains vs aussie following 0.6% GDP growth rate

The Australian dollar started to reclaim its losses yesterday following a positive second quarter GDP figure.

• Demand increased for the aussie yesterday following a better-than-forecast 0.6% quarterly growth rate which buoyed investor sentiment as it suggested that interest rates could still rise later this year.
  
• However, the aussie’s gains were capped after US stocks fell for the fourth day, with the pound closing down just half a cent at 1.9506.
  
• In trading this morning the pound has continued to lose ground with investors seemingly unnerved by Australia’s worse-than-expected trade balance figure, which was a full billion dollars further in the red in August than in July.
  
• The riskier aussie dollar was also supported by a rally in Chinese equities during eastern trading, with the Shanghai Composite closing up nearly 4.0%, which encouraged investor demand.

Tentatively positive US data enabled the euro to make marginal gains vs US dollar

The single currency rallied against the greenback yesterday to close the day up 0.3% at 1.4262.

• An overall chill in risk demand kept the euro near a two-week low against the dollar yesterday morning, with figures confirming a 0.1% quarterly contraction in the eurozone going relatively unnoticed in early trading.
  
• In the afternoon however, data emerged revealing a decrease in US crude oil inventories, raising the price of oil and putting selling pressure on the dollar.
  
• Additionally, the US saw tentatively positive data from factory orders and non-farm productivity, but analysts maintained that nervousness amongst traders prevented the euro from achieving stronger gains.
  
• In trading this morning, the single currency has continued to rise as European equity markets open marginally higher.
  
• The ECB will be releasing their latest interest rate decision at 12:45BST today which is widely forecast to remain at 1.00%, whilst in the US there are unemployment claimant figures due at 13:30BST.

The pound makes up over a cent vs the dollar on rising oil prices

Sterling posted gains of over a cent against the greenback yesterday as rising oil prices weakened the dollar.

• Data showed that the level of US crude oil inventories fell last week, which weakened the dollar as prices rose, enabling the pound to regain losses made on Tuesday.
  
• Additionally, the pound traded strongly on the back of improved construction sector data despite weaker global equities, which remained under pressure yesterday as concern lingered that the summer rally on world stock markets had proceeded too quickly.
  
• Sterling strengthened further in the afternoon, having hit a 1.6115 intra-week low early on, as the US non-farm productivity revised figure posted the largest increase since 2003.
  
• The 6.6% reading was revised up from 6.4% encouraging investors to leave the safety of the dollar, to close the day at 1.6258.
  
• In trading so far this morning, the pound has continued to gain, already surpassing the 1.63 mark.
  
• In the US today, forecasters are predicting a slight reduction in employment claims, with data being released at 13:30BST. US non-manufacturing PMI are also released at 15:00BST.

Sterling makes inroads into losses vs euro

Sterling rebounded yesterday following improved construction industry data, closing the day up 0.35% at 1.1398.

• Sterling rose yesterday, clawing back from recent losses and hitting a week-high of 1.1427 against the euro as investors covered short positions in the pound following its broad slide in past weeks.
  
• Additionally, a positive UK construction industry figure gave relief from a string of poor data emerging from the economy and helped the pound move further away from recent 10-week lows.
  
• The reading of 47.7 for August was improved from last month but still below the predicted level of 48.1.
  
• In trading this morning, the pound has continued to make marginal gains against the single currency, consolidating its position above the 1.14 mark.
  
• In the UK today data is released at 9:30BST on the services industry which is forecast to continue expanding for the fourth consecutive month, whilst in the eurozone, the ECB is releasing their interest rate decision at 12:45BST.

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.