Sterling lost further ground to the kiwi yesterday in the wake of the BoE inflation report

Sterling fell another 0.5% against the kiwi dollar as confidence in the UK economy was undermined by the BoE and Mervyn King.

• "The depreciation of sterling should lead to a recovery in economic activity," King said after the bank's quarterly report was published. "The outlook for inflation is again highly uncertain."
  
• Given more recent positive economic fundamentals in the UK, the market had anticipated a relatively upbeat report. However the dovish tone saw investors sell off the pound sharply after the report was released, taking it down to near two-week low against the kiwi.
  
• The kiwi has continued to gain in trading this morning, finding support from firmer Asian equities.
  
• Overnight, retail sales data was released in New Zealand, which actually disappointed market expectations. Sales rose by 0.2% in October, falling short of forecasts for a monthly rise of 0.5%
  
• However, the kiwi remains steady on the day,as yesterday's inflation report continues to weigh on the pound.

The aussie is climbing strongly against the pound, supported by risk appetite and positive employment figures

The aussie continued its climb against the pound yesterday, advancing for the fourth straight day, as the positive data from China encouraged risk appetite.

• Investor sentiment was boosted by Chinese data that showed the country's economy continued to recover. Industrial output in China, Australia's closest trading partner, rose by a better-than-forecast 16.1% in October, which heightened investors' appetite for risk.
  
• Analysts said the news had lifted risk appetite, encouraging carry trade investors to sell the low-yielding dollar to fund the purchase of riskier, higher-yielding assets.
  
• In the UK, the BoE's inflation report disappointed investors, focusing on the uncertainties surrounding growth and reiterating that the Bank is not yet ready to say to the market that it has finished with quantitative easing .
  
• In trading this morning, the aussie has found further support after stronger-than-expected Australian employment data for October, fuelled bets for another interest rate rise this year.
  
• Data showed that 24,500 jobs were actually created in October, confounding forecasts of for a loss of 10,000. It adds to mounting evidence that Australia is at the forefront of economic recovery and currently the aussie dollar is a further cent up against the pound.

Having reached a high above 1.50 on positive data, the euro slipped back as investors trimmed their long positions

The single currency reached a near 15-month high yesterday, but could not consolidate its position above 1.50 and retreated to close the day marginally down at 1.4980.

• The US dollar broadly sank versus most rivals yesterday, facing pressure as traders showed renewed appetite for risky assets and a "carry-trade" strategy centered on selling the greenback.
  
• Equity markets resumed their upward climb as investors showed renewed appetite for risky assets, which supported a move away from the greenback.
  
• In addition, further dovish comments from Federal Reserve officials also encouraged dollar selling, reinforcing the view that US interest rates would remain at ultra low-levels for the foreseeable future, strengthening demand for the euro
  
• Richard Fisher, the president of the Dallas Fed, who had been one of the most hawkish members of the central bank's policy committee, said he saw "more immediately deflationary concerns than inflationary ones."
  
• However, in the later session, the euro was unable to sustain such strong levels, steadily retreating back below 1.50 as traders cautioned over going too long ahead of 3 rd quarter GDP figures released in Germany and France on Friday.

Positive UK unemployment data was unable to buoy the pound in the wake of comments from Meryvn King

The pound tumbled to an intra-week low against the dollar yesterday after the BoE said recent weakness in sterling would continue to aid an export-led rebound.

• In early trading, the UK currency made hesitant gains after the Office for National Statistics said claims for jobless benefits rose by 12,900 in October, the slowest rate since April 2008 and far less that the official estimate .
  
• However, not too shortly after, the central bank's quarterly inflation report and Mervyn King's accompanying statement dampened the recent build up in confidence in the UK economy.
  
• The report did boost its forecast for growth and inflation, but continued to point toward maintaining low official interest rates well into 2010.
  
• The inflation projection showed a significant undershoot of the 2% target, which weighed on the pound. In addition the door for more quantitative easing was left far more ajar than people had anticipated.
  
• In this morning's session the pair is trading steadily around 1.6550, slightly below the overnight closing price. There is no data out in the UK today, though positive unemployment claims figures in the US, released at 13:30, may weaken demand for the haven currency.

The BoE's inflation report has put sterling under selling pressure, now back below 1.11 against the euro

The pound suffered in trading yesterday, losing over a cent (1.0%) to the euro after the Bank of England's November Quarterly Inflation Report struck a more dovish tone than expected.

• Bank of England Governor Mervyn King in a press conference reiterated an earlier opinion that a weaker currency should lend support to the recovery, putting pressure on sterling.
  
• King continued, stating that UK economy has "only just started" along its road to economic recovery, and told reporters that the central bank is keeping an open mind over the prospect of further boosting its quantitative-easing programme.
  
• Analysts said this reinforced the view that UK interest rates would remain at low levels for an extended period weakening demand the pound.
  
• The comments reversed slight gains made in early trading in the wake of positive employment figures. It was revealed that the overall UK jobless rate held steady at 7.8%, beating market expectations of a rise to 8.0%.
  
• In addition, the number of new people claiming employment benefit fell to 12.9K in October, a considerably improved figure from the 20.8K the previous month.

The pound was down against the kiwi yesterday but has picked up today after the RBNZ expressed renewed concern over the strength of the currency

The UK currency edged down against the kiwi in trading yesterday, losing just 0.1%, as weak global equities offset a poor report on the UK's credit rating.

• Sterling lost ground on Tuesday after a ratings agency said the UK was the major economy most at risk of losing its AAA credit rating.
  
• However, after a knee-jerk sell-off in response to the comments, the pound recovered some poise after traders realised that the remarks contained no new information.
  
• The kiwi was also struggled as risk appetite waned slightly with global equities failing to build on Monday's gains, which dampened demand for the higher-yield currency.
  
• This morning, the pound has recovered its losses after the Reserve Bank of New Zealand said the current high level of the kiwi dollar was not sustainable and might hinder the rebalancing of the economy after the financial crisis.

Pound continued to slip back against the aussie, hampered by a report from Fitch ratings agency

The pound continued to lose ground to the aussie dollar yesterday, dipping back below 1.80 as Fitch rating agency commented on the fragility of the UK's AAA credit rating.

• Sterling slipped back sharply as Fitch released the news in the early hours yesterday morning, with investors concerned about the long term health of the UK economy.
  
• However, sterling pulled back steadily from its sell off following a survey from the UK's Royal Institution of Chartered Surveyors, which said its measure of house prices rose to +34, its highest in nearly three years.
  
• In addition, the British Retail Consortium said the value of like-for-like UK sales rose 3.8% in October compared with a year ago, the biggest rise since April.
  
• In trading this morning, the aussie has made further ground on the pound, although its gains are limited as a raft of data from Australia's top trading partner, China, did not excite investors as it showed a marked slowdown in loan growth and sluggish trade performance.

A fall in confidence in Germany, put the euro under pressure yesterday, edging down against the dollar

The dollar stabilised after heavy selling on Monday as weak data from the eurozone put pressure on the single currency, with the pair closing slightly down at 1.4991.

• The dollar found support as global equities turned negative, failing to build on gains at the start of the week, which dulled demand for the "riskier" euro.
  
• The single currency was also undermined by a report that showed German investor confidence declined once again in November, by more than economists estimated.
  
• The ZEW Centre for European Economic Research said its index of investor and analyst expectations in Germany, which aims to predict developments six months ahead, dropped to 51.1 from 56 in October.
  
• Having lost significant ground in early trading, the euro recovered steadily through the afternoon session as risk appetite returned to the markets and investors resumed dollar selling.
  
• However, analysts did note that concerns continued to be voiced about the strength of the euro, with one EU official stating that its current valuation is not good news for growth in Europe."
  
• Currently, the single currency is trading slightly higher as European stocks open on a positive note, with the price holding above 1.50.

Sterling stumbled yesterday after a damning credit rating report weakened confidence in the UK economy

The pound dropped for the first time in six days against the greenback, though its losses were minimized with dollar selling remaining the overall market trend.

• Initially sterling fell sharply, losing over a cent, after a ratings agency said highly-indebted Britain was the major economy most at risk of losing its triple-A rating.
  
• The pound retreated from a three-month high against the dollar after Fitch told Reuters Britain would have a tougher time than the United States in sustaining its fiscal deficit without impacting interest rates or the currency.
  
• However, sterling was able to trim its losses as strong data on UK house prices and retail sales released overnight suggested the economy was showing positive signs of emerging from recession.
  
• Furthermore, analysts felt that the pound had fallen in a knee-jerk reaction to Fitch's statement and that traders pared back their sterling short positions as they realised there was nothing new in the news.
  
• In trading this morning, the pair is steady, currently hovering around 1.6750, as investors await important UK employment figures and the BoE's quarterly inflation report.

The pound lost ground to the euro yesterday but recovered to close just 0.04% down

Sterling came under heavy selling pressure after the UK's credit rating came under fire, but the pound recovered to finish just marginally down against the euro.

• In early trading, the single currency advanced against the pound as European stocks rebounded and Fitch Ratings said the UK's credit rating is most at risk among top-rated nations.
  
• The pound dropped against all but one of the 16 major currencies after David Riley, head of global sovereign ratings at Fitch, said the UK needs "the largest budget adjustment."
  
• Data also revealed that the UK trade deficit widened sharply to an eight-month high in September as imports of cars surged to their highest level for more than a year.
  
• The Office for National Statistics reported the UK's global goods trade deficit widened to £7.2 billion in September from a deficit of £6.1 billion in August.
  
• However, sterling was able to recover, recouping losses on the view that the comments from Fitch added little to what was already known.
  
• In addition, the German ZEW Economic sentiment survey revealed a further drop in confidence, which dampened demand for the euro.
  
• Investors today look ahead to the Bank of England's quarterly Inflation Report at 10:30, when the central bank will set out its latest forecasts for growth and prices.