RBNZ statement has limited impact on kiwi, with sterling easing off only slightly

Having gained nearly 2 cents in two days against the kiwi, the pound has struggled this morning in the wake of the RBNZ rate statement.

• Yesterday, strong European equities were enough to outweigh solid commodity prices allowing the pound to gain further ground against the New Zealand currency closing 0.5% up at 2.3790.
  
• The FTSE in particular epitomised the impressive rebound in stocks that we have seen recently, surpassing 5000 points and encouraging demand for sterling.
  
• This morning however, risk sentiment has supported the kiwi as investors see through the modest statement issued by the Reserve Bank of New Zealand that warned further rate cuts were possible.
  
• The rate held at 2.50% which came as no surprise, the statement itself though spoke of a patchy recovery and a high New Zealand dollar that could stand in the way of true recovery.
  
• Investors were not too phased however, realising that threats of a rate cut were not too credible in the face of their recent economic forecasts.
  
• The kiwi is now trading marginally higher for the day, as investors await the BoE’s statement.

Poor data has hindered the aussie's progress, allowing the pound to regain losses

Disappointing retail figures and rising monthly unemployment in Australia has allowed the pound to rally its recent sharp losses against the aussie.

• Firm gold and commodity prices prevented the pound from gaining significant ground against the aussie dollar yesterday after a surprising drop in retail sales in Australia in July had initially dimmed demand for the currency.
  
• The pound, however, was able to move 0.5 cents further from the 13-year low hit on Monday as European equities spurred demand for the currency.
  
• Sterling has continued to make gains in trading this morning after data from Australia revealed a surprisingly big rise in unemployment in August, which undermined expectations for a rise in interest rates in the near future.
  
• Demand for the aussie has cooled following the data, even though overall unemployment remained steady at 5.8%, with the pound moving up 0.3% in trading today.

Euro made further gains as selling pressure mounted on the dollar

The single currency continued to extend its yearly high against the greenback yesterday, briefly reaching 1.4600 as risk sentiment showed little sign of easing.

• The dollar continued to be broadly sold, extending its sharp falls from Tuesday, as global equities continued on their bullish run, blunting demand for haven currency.
  
• Selling pressure on the dollar was also compounded as the continuation of rising gold prices increased the metal’s appeal as an alternative investment, and as oil rose to over $72 a barrel.
  
• Some analysts have speculated however that this currency pairing could be in for an imminent correction downwards as they expect the euro is trading in the ‘over-bought’ territory. A continuation of bullish risk sentiment though could see the euro push higher.
  
• Data on the US trade balance is released today at 13:30BST, with forecasters predicting a slight increase in the deficit which may support a return to safer assets.

Strong equities pushed the pound higher vs the dollar

Sterling achieved a new two-week high against the dollar yesterday, supported by a continuation of bullish equities, eventually closing up at $1.6546.

• After an unsteady start, sterling managed to gain further substantial ground against the US dollar yesterday after rating’s agency Moody’s said Britain’s triple-A sovereign debt rating was “resilient,” adding further weight to the economic recovery.
  
• Early trading was relatively modest however with UK trade data, that showed the country’s trade deficit narrowed slightly in July, having little impact on the market.
  
• However, in the afternoon, risk sentiment was buoyed considerably as the FTSE100 reached 5000 points for the first time since October last year, with the pound briefly climbing to 1.6589.
  
• Additionally, analysts have noted that the high price of gold has encouraged investors to move into metals to hedge against declines in currencies, which has put broad selling pressure on the dollar.
  
• In trading this morning, the greenback has capped its losses, regaining around 0.2% in value, despite yet another strong opening in European stock markets.

Sterling continues to trade in the red against the euro

A rally in equity markets was unable to prevent the pound from sliding for the third consecutive day against the euro yesterday, closing down at 1.1365.

• In early trading yesterday the pound held steady against the single currency, with minor data going relatively unnoticed, as the upcoming BoE’s rate decision prevented any significant movement.
  
• However, strong European stocks were unable to rally the pound, working instead to the benefit of the euro, which edged up another 0.2%.
  
• The pound is trading marginally lower again today, as investors await the BoE’s interest rate decision announced at 12:00BST, which could have a significant impact on the markets, as investors are able to gauge the depth of the UK economic recovery.
  
• Certain analysts are saying that there is a chance that quantitative easing may be extended, a policy which the minutes from the last meeting revealed Mervyn King was in favour of, which would risk sending the pound into another downward spiral.

European stocks boosted the pound vs kiwi yesterday

The pound managed to recover nearly a cent, 0.4%, against the New Zealand dollar yesterday as investment demand returned to the UK currency.

• Data showed that in July, production rose by 0.9%, which fuelled a wave of optimism about UK economic recovery.
  
• Bolstering the optimism was a forecast from the National Institute of Economic and Social Research which estimated that GDP rose in the third quarter by 0.2%, which, if correct, would suggest that the UK is out of recession.
  
• Sterling also received a boost from European stocks which continued their strong run.
  
• Trading this morning has seen the pound make further inroads into last week’s losses against the kiwi, currently up around 0.4%.
  
• The current strength of the kiwi will have investors around the world focused on the rate decision and corresponding statement released by the Reserve Bank of New Zealand at 22:00BST today, which could have a significant impact on the currency.

Sterling reversed slide against aussie, as UK economic recovery hopes were renewed

The pound capped its four-day slide against the aussie yesterday, buoyed by renewed support for the UK’s economic recovery.

• Following from positive services figures last week, the UK economy was given another boost as a manufacturing production reading came in higher-than-expected at 0.9%.
  
• Additionally, European stocks also continued to show strength, with the FTSE100 briefly pushing past 4950, which supported sterling’s rally.
  
• In Australia, figures yesterday showed that business confidence hit a 6-year high in August, adding to mounting speculation that local rates could rise in coming months.
  
• However, this data, which drove the aussie forward against the dollar, was unable to impact on sterling which repealed some of its recent losses to trade up 0.2%.
  
• The Australian economy suffered a setback this morning as retail figures for July were down on the previous month, which has put pressure on the aussie, allowing sterling to rise 0.5% in trading so far today.

Selling pressure was mounted on the dolla yesterday, with gold reaching $1000

The euro rallied strongly against a broadly weakened dollar yesterday, briefly reaching a yearly high of 1.4523 at 15:30BST before closing at 1.4474.

• The single currency gained almost exactly 1.00% yesterday, as rising risk sentiment, supported by strong equity markets, continued to put selling pressure on the greenback.
  
• The dollar suffered from a rise in gold prices, which reached its highest level since March 2008, as well as fresh concerns over its status as a reserve currency, with analysts suggesting that dollar selling pressure could continue over the short term as risk sentiment strengthens.
  
• The single currency was given further strength in the afternoon as the US markets opened up positive, encouraging investors to sell the safer currency.
  
• In trading this morning, the euro has continued to trade near its 2009 high, as investors continue to sell the low-yielding dollar in favour of riskier assets.
  
• Investors will be listening to the words of the Chicago Fed President, who speaks today at 13:00BST, for clues to the pace of US economic recovery, whilst in the eurozone, there are no major announcements.

The pound posted strong gains against the US dollar yesterday as risk aversion eased

The pound reached a two-week high against the dollar yesterday, building on gains made last week, to close the day up 0.8% at $1.6486.

• The pound made strong gains against the greenback yesterday, finding support from stock markets which rose on speculation that the global recession is easing, sapping demand for the currency haven.
  
• Sterling found further support from July’s manufacturing production figure, which at 0.9% was a good improvement from the 0.4% reading in June and helped to bolster demand for the currency.
  
• Additionally, traders cited gold’s rally above $1000 per ounce as a source of broad downward pressure on the US currency.
  
• These cumulative effects allowed the pound to briefly climb over two cents, to a high of 1.6558, as investors bought back in to the UK recovery.
  
• The pound has continued to rally again this morning, breaking above the 1.6500 resistance level, as risk sentiment remains high.

Early gains for the pound vs euro yesterday were lost as equities receeded from their highs

Having made early gains against the single currency, the pound stumbled in later trading, to close the day marginally below the 1.14 level.

• Sterling initially reversed Monday’s losses, recovering to 1.1451 as data revealed that manufacturing output rose at its fastest rate in one and a half years in July, which encouraged investment demand.
  
• The improved reading of 0.9%, which was three times what had been forecast, was helped largely by a sharp rise in car production which rose by 10.4% in July from June.
  
• The figures suggest that the UK economy has made a stronger start to the third quarter and may be on track to emerge from recession sooner than previously predicted.
  
• However, in the afternoon the pound was unable to capitalize on its early gains as the rally in equities appeared to favour euro investment, allowing the single currency to regain its value.
  
• Trading this morning has seen the pound edge lower as the European stock markets start trading in the red.
  
• The pound may be able to hold its value today if UK trade balance figures, released at 09:30BST, follow forecasts and show improvement in July.