Strenghtening risk appetite for riskier assets, supports demand for the kiwi

Having advanced strongly following the BoE’s statement yesterday, the pound fell sharply against the kiwi as investors chose to cash in on profits.

• Demand for the pound strengthened yesterday as the UK economy was given a level of stability following the BoE’s decision to keep both interest rates and its asset purchasing scheme unchanged.
  
• In the wake of this news, the pound made strong gains against the kiwi, briefly reaching 2.3906.
  
• However, at this point, investors, speculating that the climb against a strong New Zealand dollar could not be sustained, chose to cash in on short profits made, which sent the pound tumbling back down to a close of 2.3644, a fall of 0.6% for the day.
  
• This morning the pound, having suffered a broad sell off, briefly recovered back over 2.3700, but has since slid further as demand for higher-yielging currencies strengthens amid a recovering global economy.

A strong aussie dollar fails to regain losses incurred against the pound

The pound continued to advance steadily against the Australian dollar yesterday, buoyed by renewed confidence in the UK economy.

• The pound advanced nearly a cent (0.5%) against the aussie yesterday, as investor demand returned to the UK currency as the BoE left both interest rates and QE unchanged.
  
• Having suffered recently from a lack of confidence in the economy, sterling was given firm support as the BoE’s decision steadied investor concerns about the strength of the UK’s recovery.
  
• The aussie also continued to suffer throughout the day from an increase in monthly unemployment, and soft retail sales for July, which undermined hopes for an early rise in interest rates.
  
• Robust Chinese economic data earlier this morning, which has boosted commodity linked currencies against the dollar, was unable to prevent the aussie from sliding further against the pound, which is currently trading another 0.5% up for the day.

Euro advances further aginast a broadly weakened dollar

A choppy day in this currency pairing eventually saw the euro advance 0.15%, its fifth straight day of gains against the greenback.

• The single currency was initially able to make strong gains against the greenback yesterday, hitting a new high for 2009 of 1.4611, after a report showed a drop in the number of US jobless claims last week.
  
• The improvement to 550K claims, supported investors’ recent demand for riskier investment in stocks, commodities, and currencies.
  
• However, data also showed that the US trade deficit for July widened by 16.3% to $32.0 billion, the biggest month-on-month increase since 1999, which dented risk sentiment and sent the single currency back below 1.4600.
  
• Early rises in European stocks also faded in the afternoon which put further selling pressure on risky assets, with the euro finally closing down at 1.4579.
  
• Better-than-expected Chinese data last night has put further selling pressure on the dollar, with the single currency continuing to advance this morning.
  
• There is a consumer sentiment survey in the US today at 14:55BST which will give investors a good indicator of the current level of confidence in the US economy.

Sustained selling pressure on the dollar supports demand for the pound

Sterling continued to gain yet further ground against the greenback yesterday, advancing another 0.6% to close the day at $1.6649.

• In morning trading yesterday, European indices fell back to trade in the red, with the FTSE heading back below 5000 points, which unnerved investors and put selling pressure on the pound.
  
• At midday though, the BoE announced that interest rates would remain steady at 0.5% and that the asset-purchasing programme would not be extended, as some had predicted, which enabled the pound to hit its highest point against the dollar since August 10 th, at 1.6684.
  
• The pound was also supported by a rise in risk appetite as US weekly employment change figures continued to improve.
  
• Earlier this morning, a raft of positive data emerged from China, adding to hopes of a global recovery, prompting investors to keep shifting funds into riskier assets, and enabling the pound to extend its monthly high to over $1.67.
  
• Light profit taking however has capped the pound's advances, with the pair currently trading around 1.6700.

Pound continues to rally as BoE returns a level of confidence to the economy

The pound was able to reverse a three-day slide against the single currency yesterday, as investor confidence was buoyed by the BoE’s decision not to extend the QE programme.

• Trading was strictly range bound yesterday morning, as investors were cautious of taking short positions ahead of the Bank of England rate decision.
  
• In the afternoon however, the pound advanced as the BoE left interest rates on hold at 0.5% and left its asset-purchase budget unchanged £175 billion.
  
• The pound recovered to trade well above the 1.14 level as improved investor sentiment toward the Britain's economic recovery strengthened demand for sterling.
  
• Weakening equities did cap the pound’s gains though to 0.45%, closing the day at 1.1416.

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.