Kiwi gained further yesterday but has relinquished some of its gains in trading this morning

The kiwi gained another 1.2% in trading yesterday, closing at 2.3101, buoyed by consumer confidence and strong Asian stocks.

• The kiwi extended to a twelve and half year high against the pound yesterday, as risk was supported by a higher-than-expected industrial production figure in the US.
  
• One analyst said that in an environment of growing economic confidence, there was little on the horizon to shake the kiwi’s strength.
  
• However in trading this morning, sterling has reversed its downward spiral, currently trading around 0.2% higher.
  
• Data from New Zealand late last night revealed a decline in their Business NZ Manufacturing Index which has dampened demand for the currency, enabling the pound to make a slight recovery.

High commodity prices and risk appetite keep the aussie strong against the pound

The aussie continued to post decade long highs against the pound yesterday, as risk appetite in the market strengthened.

• Increasing optimism over the prospects for global growth boosted commodity-linked currencies, enabling the aussie to gain a further 1.1% against the pound, as well as achieving a 12-month high against the dollar .
  
• Indices in Hong Kong, Korea, and Taiwan all ended on Tuesday at their highest levels of 2009, reflecting buoyant investor sentiment in the region, with commodity-linked stocks leading the charge, and supporting demand for the Australian dollar.
  
• The aussie was also supported by further upbeat data released in the US yesterday, heightening investor confidence.
  
• The market is now pricing in a possible 50 base point rise in Australian interest rates, whilst by contrast the BoE has indicated that the economy may still be in need of further monetary help.
  
• In trading this morning the pound has capped its losses as investors await important UK retail sales figures for August, released today at 09:30BST.

The euro shows no sign of slowing its rally against the dollar, as investor confidence continues to improve

The dollar remained under pressure yesterday as an increase in America’s industrial output last month encouraged investors to sell the US currency.

• US economic data revealed that industrial output rose in August and the current-account deficit shrunk, bringing the figure under $100 billion, enabling the euro to advance further.
  
• The dollar traded at its lowest level this year as another report also showed America’s consumer prices climbed last month, encouraging investors to pursue higher-yielding currencies.
  
• Additionally, rising risk appetite, spurred by the words of Ben Bernanke, boosted global stocks, stemming haven demand and pushing the euro to a close of 1.4708.
  
• The single currency has now gained over 2.5% riding on improved investor confidence and expectations that the US rates are likely to stay rock bottom for some time.
  
• Analysts have warned that this upward trend is now extremely stretched and that the rally could soon run out of steam, with the price possibly in for a technical correction.

Continued selling pressure on a broadly weak dollar has allowed the pound to strengthen

The pound was able to stem recent losses against the greenback yesterday, as selling pressure on the US dollar increased.

• Sterling was supported yesterday morning as European markets opened up strongly following U.S. data on Tuesday that reaffirmed the world's main economy is about to return to growth.
  
• Confidence was further increased by comments from Federal Reserve chairman Ben Bernanke, who said the US recession was now "very likely over."
  
• However, the pound traded in the red for the majority of the day, unable to break through the 1.6500 resistance level, with a raft of US data in the afternoon, which included CPI figures, industrial production data, and an improved current account figure, failing to encourage demand for the UK currency.
  
• The pound did recoup losses though as the US markets came online and also opened strongly, reaffirming confidence in the global recovery, and diminishing demand for haven currency.
  
• Sterling has continued to rally this morning, currently trading up 0.2% for the day.

The pound slowed its rate of decline against the euro yesterday, as stocks continued to rally

In a choppy day’s trading, the currency pair eventually closed down at 1.1214, with strong equities helping to stem the pound’s decline.

• Yesterday, the pound initially pared its recent fall against the euro after confidence in the global economy saw European equities open strongly.
  
• However, demand for the pound soon ebbed away, as data showed that the unemployment claimant count rose by 24,400 in the UK in August, which despite being a declining figure on last month, brought the claimant rate to 5.0% of the workforce.
  
• Though the data was broadly in line with expectations, the figures were not as bad as some had feared, providing some respite for the pound.
  
• In the afternoon, as US markets came online, equities continued to rally, with the FTSE 100 reaching a 12-month high, which also prevented the pound from sliding too far.
  
• UK retail sales data is released today at 09:30BST, with forecasts predicting a slight fall, which could put added selling pressure on the pound.

Demand for sterling slides, whilst demand for the kiwi soars

The pound reversed gains made on Monday, falling over two cents against the kiwi (0.9%), as the likelihood of an early rate rise in the UK was diminished.

• Sterling suffered yesterday as bearish sentiment toward the currency gained momentum after BoE governor Mervyn King said he would consider cutting rates on commercial banks’ reserves held at the central bank.
  
• Additionally, global economic optimism, driven by strong retail sales and producer prices in the US coupled with a positive statement from Fed chairman Bernanke, pushed up higher-yielding assets like the New Zealand dollar.
  
• The pound fell 1.1% against the kiwi, closing down at 2.3383, and the pound is fairing little better in trading this morning, having already fallen a further 0.7%.
  
• With little data of significance out in New Zealand this week, the kiwi will continue to be heavily influenced by rising risk appetite which could see the currency continue to strengthen.

Aussie advances against the pound as risk appetite in the market strenghtens

Sterling continued to slide against the aussie yesterday, as confidence in the strength of the UK economy was put under pressure.

• Early gains for the pound, following a rise in house prices, were dashed in an inflation report in which BoE governor Mervyn King stated the central bank was considering lowering interest rates.
  
• Demand for the pound immediately fell, with the price falling from an intra-day high of 1.9326, to a close of 1.9089, a drop of 1.2%
  
• Mr King added that the British economy had probably started growing again but recovery would be slow and risks to inflation were still to the downside, which put further selling pressure on the pound.
  
• Overnight the Australian dollar has advanced further, supported by strong Asian stocks and rising optimism over the global recovery, with the pound now breaking thirteen-year lows, falling another 0.6% so far today.

Euro strengthens against the dollar as data spurs hopes of global recovery

Having gained steadily throughout European trading, demand for the dollar ebbed away yesterday afternoon following positive economic figures allowing the euro to strengthen.

• The dollar initially jumped after a pair of U.S. economic reports said retail sales rose 2.7% and producer prices rose 1.7% in August, both more than economists expected.
  
• Retails sales were spurred on by the government’s “cash for clunkers” scheme, though even without cars, sales still increased by 1.1%, reinforcing hopes that the economy is on the path to recovery.
  
• Additionally, New York’s Empire State manufacturing index revealed another growth in output, further strengthening demand for the greenback.
  
• However, the dollar abandoned these gains, touching a fresh 2009 low against the single currency, as investors moved into riskier assets in the wake of the positive data.
  
• In choppy trading, the dollar was unable to sustain its burst of strength, as the euro continued to consolidate the strong position it has accrued over the last fortnight.
  
• The CPI inflation rate is out in the US today at 13:30BST, with analysts forecasting the rate to hold steady at 0.1%.

King's statment puts selling pressure on the pound, allowing a broadly weaker dollar to gain

The possibility of further monetary stimulus in the UK economy sent the pound tumbling against the dollar yesterday closing down at $1.6488.

• The pairing, which had reached a 1.6655 high in early trading, reversed sharply as BoE governor Mervyn King explained that the central bank was considering reducing its deposits rate in order to discourage banks from accumulating reserves.
  
• In testimony before UK parliament, Mervyn King, governor, said he was looking at “reducing the remuneration” of commercial bank reserves.
  
• The potential for lower deposit rates and gloomy assessment weighed on UK government bond yields and pulled the pound down to an intra-day low of $1.6402.
  
• Additionally, in the US, positive economic figures supported the dollar as investors were prompted to return to the theme that the US is at the forefront of a global economic recovery.
  
• For months, the greenback has tended to fall following strong data as investors' willingness to buy riskier assets strengthens. That trend has shown signs of diminishing though recently, and resuming its more traditional correlation to economic data.

Pound slides sharply against the euro on speculation over possible interest rate cut

Sterling fell to a near four-month low against the single currency yesterday following Mervyn King’s suggestion of an interest rate cut.

• Sterling fell to a low of 1.1233 after Mervyn King said that the central bank was considering reducing the interest rate in order to provide a disincentive for banks to hoard cash, encouraging them to lend.
  
• According to analysts, such a move would effectively be an expansion of the central bank's quantitative-easing programme, and these monetary risks constitute a major hurdle for sterling.
  
• King’s statement stemmed an earlier rally in which sterling briefly advanced after UK consumer price inflation data came in stronger than expected in August.
  
• Figures showed UK consumer prices rose 0.4% last month to give an annual reading of 1.6%.
  
• Additionally, in the eurozone, data showed that German economic sentiment rose to 57.7 in September, higher than the 56.1 reading seen in August, which further supported the euro.
  
• The pound eventually closed down at 1.1247, with rallying global stocks failing to buoy the UK currency, and the price has continued to slide overnight, with trading currently around 1.1200.