Data revealed a growing confidence among New Zealand businesses, which has driven the pound down further

The pound reverted back to its downward trend against the kiwi in trading yesterday, losing 0.8% to close the day near last week’s lows at 2.2163.

• A strong jump in a New Zealand business confidence survey added to evidence that the economic recovery is gaining pace, supporting demand for the kiwi.
  
• The Reserve Bank of New Zealand published a bright economic outlook yesterday, which was also picked up on by investors with expectations for a rate rise strengthening.
  
• Additionally, in the US, the second quarter GDP figure was revised upward revealing that the economy had contracted by less than initially expected, which supported a move into riskier assets, although weak employment data did offset this trend slightly.
  
• In trading this morning, the pound has lost further ground, with the price edging down below 2.21 as confidence in the kiwi remains strong.
  
• However, analysts have stated that the New Zealand dollar may cap its advances with investors unwilling to chase the currency ahead of US payrolls and manufacturing data later this week.

Aussie made strong gains yesterday as further positive economic data supported investor demand

Tuesday’s gains for the pound proved short lived as the aussie advanced over two cents (1.3%) to send the price down to a close of 1.8091.

• The aussie was buoyed by a larger than expected rise in retail sales in Australia, which heightened expectations that the Reserve Bank of Australia would be among the first of the world’s leading central banks to start raising interest rates.
  
• Sales beat forecasts in jumping 0.9% in August from a 0.9% decline in July, which buoyed demand for the high-yielding currency.
  
• Analysts noted that the aussie dollar is being well supported from Australia’s status as a big beneficiary of the solid Chinese economy.
  
• In trading this morning however, sterling has rebounded, currently up half a cent, with traders noting that the aussie is suffering from slight investor profit taking.
  
• Data has also revealed a marginal monthly fall in commodity prices in Australia this morning, which has dulled investor demand slightly.

Euro advanced yesterday but its progress has been halted today in the wake of dovish euro speculation

The euro pushed higher against the dollar yesterday in choppy trading, even as disappointing US economic data weakened stocks.

• The single currency made strong gains yesterday morning, supported by the results of the ECB cash tender offer.
  
• The volume of bids was lower than expected, which implied that financial conditions in the eurozone were improving and there may be less need for the ECB to inject money into the market.
  
• Additionally, German unemployment fell again in September and even after seasonal adjustments, the number of jobless fell by 12,000, resulting in an overall dip in the unemployment rate to 8.2%, which buoyed demand for the single currency.
  
• In the afternoon however, the single currency trimmed its gains as investors checked their risk activities following a worse-than-expected change in ADP non-farm employment in the US.
  
• There was also negative manufacturing data from the Chicago area, although analysts noted that data from this region has been volatile and generally erratic recently, which prevented the dollar from garnering too much support.

Weak US data yesterday afternoon strengthened dollar appeal, trimming sterling's gains

A mixed bag of data in the US prevented the pound from sustaining early gains yesterday, eventually closing just 0.1% up on the day at $1.5980.

• The pound shot up against the dollar in early trading, posting an intra-day high of 1.6123, after an industry report showed consumer confidence in the U.K. jumped by the most in 14 years.
  
• But the greenback trimmed its losses after the ADP Non-farms employment data revealed a worse-than-expected change in US employment which eased risk appetite and returned investors to the haven currency.
  
• The sharp dip, was initially offset as more data revealed an upward revision in the US GDP figure to just a 0.7% contraction from a previous -1.0%, and beating forecasts of a downward revision.
  
• However, later in the afternoon a weak reading of US manufacturing activity triggered mild safe-haven flows into the greenback, confirming investors’ fears that a sustained economic recovery is struggling to take hold.
  
• The dollar is trading marginally higher again this morning with traders awaiting important data on US employment, released today at 13:30BST.

Sterling relinquished strong gains vs euro yesterday as risk appetite eased

The British currency, unable to capitalise on strong early gains, lost ground against the euro yesterday, as an easing of risk appetite wore heavily on the fragile pound.

• Initially, sterling extended Tuesday’s rebound following a surprising jump in UK consumer sentiment, posting its biggest monthly boost in more than 14 years and signalling growing optimism about the UK economy.
  
• Additionally, the pound found support from signals that the Bank of England may not cut its bank reserves deposit rate anytime soon.
  
• In the afternoon however the pound gave up its gains, as weak US data brushed off on equity markets and sent the pound back down to a close of 1.0915.
  
• In trading this morning though, the single currency has slipped back on speculation that finance ministers and central bankers will discuss the euro’s strength at a G7 meeting later this week.
  
• Manufacturing data is due in the UK today at 09:30, with forecasts predicting a return to expansion in the industry, which may offer the pound some support.

Sterling made gains against the kiwi yesterday, but rising risk appetite has supported kiwi advances today

Evidence that the UK economic recovery is strengthening enabled sterling to reverse a five day slide against the kiwi, closing up at 2.2341.

• Sterling clawed back nearly two cents, or 0.8%, in the wake of strong data referring to retails sales, credit lending, and a final upward revision to the GDP figure.
  
• Sales volumes at UK retailers bounced back to their strongest level for five months in September, reaching levels well above expectations, whilst the second quarter GDP figure in the UK was revised to just a 0.6% contraction.
  
• The positive data was offset slightly by a weaker-than-expected UK current account deficit, but investors seemingly overlooked this, with demand for the pound broadly rising.
  
• In trading this morning however, the kiwi has advanced, supported by a survey showing business confidence in New Zealand at a ten-year high, which fed speculation of a rise in rates.
  
• The kiwi also benefitted from a sluggish dollar and strength in the aussie, which supported appetite for riskier assets.

Positve UK data enabled the pound to reverse losses against the aussie yesterday

The pound reversed recent losses to gain 0.75% on the aussie yesterday in the wake of some positive economic data, which spurred investor demand.

• A GDP revision showed that British output contracted 0.6% in the second quarter compared with activity in the first three months of 2009, better than the previous estimate of -0.7%, according to the Office for National Statistics
  
• This data was supported by higher realised sales and an increase in net lending to individuals, which, together, underlined hopes that the UK should pull out of recession in the 3 rd quarter.
  
• The positive market reaction enabled the pound to distance itself from long-term lows hit recently against the aussie, though an increasing UK current account deficit may weigh on sterling’s recovery.
  
• In trading this morning, the Australian dollar has rebounded, already up 0.4% on the day, following better-than-expected month on month retail sales, which add to the case for a rise in interest rates as early as November.

An easing of risk appetite weakened the euro yesterday, but it has rallied back over $1.46 so far today

The single currency hit a two-week low against the greenback yesterday as a rise in risk aversion strengthened demand for the haven currency.

• The dollar rose for a second day as evidence that economies have yet to shake off the worst effects of the global recession spurred demand for the safety of the U.S. currency.
  
• Russia’s central bank cut its main interest rate, signaling that things are not as positive as they appeared previously, and spurring demand for the dollar.
  
• The greenback also found support following a disappointing US consumer confidence survey, which cautioned investors in their risk appetite.
  
• Comments from ECB President also weighed on the euro, with Trichet saying that he was in favour of the argument for a strong US dollar in the foreign exchange markets.
  
• The remarks were reflective of a concern regarding the strength of the single currency on the eurozone economic recovery.
  
• This morning, the single currency has stretched back over 1.46 as risk sentiment returns to the market, diminishing demand for the dollar.

More positive investor sentiment returned to the UK yesterday, supporting a slight pound recovery

Sterling reversed a four day slide against the dollar yesterday, supported by positive economic data that included another upward revision of the 2nd quarter GDP figure.

• The final gross domestic product figure showed that UK growth contracted by 0.6% between April and June, a narrower fall than the previous estimate of a 0.7% contraction.
  
• The revision is almost entirely due to stronger estimates of construction output than previously forecast, according to analysts.
  
• Sales volumes at U.K. retailers also bounced back more than expected to their strongest level for five months in September and are expected to remain steady in October.
  
• In the US, a confidence survey produced a figure below the level expected, which cautioned investors slightly, capping sterling’s gains and bringing it down from an intra-day high of $1.5989.
  
• However, the pound has continued to rally this morning, already up another cent and currently trading around 1.6060, following the strongest Gfk consumer confidence survey figure since January 2008.

The UK economy is showing signs of recovery, which has buoyed the ailing pound

In trading yesterday the pound picked itself up from 6-month lows against the single currency, gaining 0.7% as positive data buoyed investor sentiment.

• In a final revision, Britain’s second quarter GDP figure was reported as -0.6%, up from a previous revision of -0.7% and strengthening claims that the UK will exit recession in the third quarter.
  
• There was also positive data from the UK CBI retail sales index, which showed considerable improvement from last month, reaching levels well above expectations.
  
• Additionally, lending to individuals rose in August, reflecting both an increase in the willingness of high street banks to extend credit, and also improved consumer confidence in the market as they begin to take on more debt.
  
• In the evening, it also emerged that the BoE may not be planning to lower interest rates, backtracking from King’s recent comments, and enhancing the pound’s yield appeal.
  
• Sterling fared well following the day’s news, but its gains were capped as it was also revealed that the U.K.'s current account deficit widened in the second quarter to its largest level for nearly two years, as investment income narrowed.