Sterling is up against the kiwi as rising risk appetite has little impact on a weaker NZ dollar

The pound crept up against the kiwi dollar in trading yesterday, though with little economic data to guide the market the pair held relatively steady.

• Rising risk appetite, spurred by better-than-expected US retail sales and robust Japanese growth figures, was unable to lift demand for the higher-yielding currency.
  
• Investors remain wary of the kiwi after the Reserve Bank of New Zealand made it clear that they plan to keep interest rates at a record low level well into 2010.
  
• In trading this morning the pound has rallied over a cent, bringing the price back over 2.25 with investors taking their lead from a weaker Australian dollar.

Following a slow day, the pound is currently trading strongly against the aussie following dovish comments from the RBA

There was little movement between this pair yesterday with the pound managing to make hesitant gains as investors remained cautious ahead of RBA monetary policy minutes.

• Rallying equities and the rising price of gold were unable to push the aussie higher in trading yesterday as market participants held steady before important policy information.
  
• Indeed, the price of gold hit another record high yesterday as the US dollar resumed its downward trend, which helped global equities to fresh highs for 2009.
  
• In trading this morning, the aussie has slipped backed after the central bank said it was keeping an open mind on the pace of further interest rate rises, forcing investors to cut bets of a December hike.
  
• Though the RBA were less hawkish than many had expected, calling future rate rises as "open question," the market is still pricing in 155 basis points of rate rises next year, hoisting the target rate to 5%.
  
• Currently the aussie has dropped back 1.0%, enabling the price to climb back over 1.81.

The single currency has once again found a ceiling at $1.50, currently trading slightly lower despite strong risk appetite

The single currency posted gains against a broadly weaker dollar yesterday, buoyed by a rally in risk appetite and the words of Ben Bernanke.

• The dollar weakened against most of its major counterparts as Japan's economy expanded in the third quarter at the fastest pace in more than two years, encouraging demand for higher-yielding assets.
  
• Japan's gross domestic product rose at an annual 4.8%, Cabinet Office figures showed yesterday. It was the second straight advance after the nation's deepest postwar recession.
  
• Strong US equities and data showing that retail sales rose more than economists predicted suggested improvement in the US economy and emboldened investors to move towards riskier assets and away from the relative safe-haven of the greenback.
  
• In the evening, the dollar pared its losses after Federal Reserve Chairman Ben Bernanke gave reassurances that the central bank is committed to a strong currency but failed to convince investors that the US would take action to shore up the greenback.
  
• In trading this morning, the dollar has made hesitant gains, buoyed by rising risk aversion due to sagging Asian stock markets, with Japan's Nikkei 225 closing down 0.6%.

The dollar has weakened against the pound following a speech from Fed Chariman Bernanke

Sterling shot up to a three month high of 1.6875 against the dollar yesterday after strong equities and comments from the Fed Chairman encouraged risk appetite.

• Asian and European stock markets started the week on a positive, and Wall Street joined the trend in the US, with the S&P 500 claiming another peak for the year, which weakened demand for the haven currency.
  
• Stronger-than-forecast US retail sales numbers for October added to the optimistic mood.
  
• U.S. retail sales increased a seasonally adjusted 1.4% in October, led by a rebound in auto sales from a post-clunkers slump .
  
• As the dollar weakened, investors were encouraged to add to bets in the carry trade, which added pressure to the ailing greenback.
  
• In addition, in the evening Fed Chairman Ben Bernanke mentioned the need for a strong dollar, which encouraged dollar selling.
  
• However, Bernanke did not promise any support for such a policy and in fact reiterated his stance on holding rates low for an extended period. In response the pound has capped its gains in trading this morning, with the pair trading steadily around the overnight closing price.

The pound is enjoying a strong rally at the moment, currently hovering just below 1.13

The pound climbed for the third consecutive day against the single currency, reaching up to a two month high of 1.1270 following the positive words of leading policy makers.

• During the early trading sessions, the pound found slight support as rallying equities firmed up demand for sterling, though the pair remained relatively range bound.
  
• On the US session, a speech from Ben Bernanke saw a sharp spike in demand for the pound as his comments on the need for a strong dollar strengthened confidence in the global economy.
  
• Sterling was able to hold its gains following comments from BoE policy maker Andrew Sentance who highlighted the risk of stoking inflation if the central bank keeps emergency stimulus measures in place for too long as Britain's economic recovery gains traction.
  
• For sterling, the focus remains on whether or not the Bank of England has finished asset purchases under its quantitative easing programme, with the minutes to its November meeting set to be released on Wednesday.
  
• The minutes will probably be the key event for the pound this week, given the high degree of uncertainty surrounding the voting pattern.

The kiwi made strong gains against the pound at the end of last week but has pared its gains this morning

Sterling slipped back nearly two cents against the kiwi dollar as risk appetite was upheld by strong US and Asian equities.

• Having traded sideways during the European session on Friday, the kiwi made gains as the US equity markets opened on a positive note, despite weaker than expected trade data, which spurred a modest return to risk appetite.
  
• In trading this morning the kiwi is slightly lower after data showed little inflationary pressure in the economy, supporting the central bank's view that rates will be on hold until the second half of 2010.
  
• The New Zealand producer price index fell more than expected in the third quarter, while activity in the services sector retreated for the first time in four months in October, reflecting a patchy recovery from the recession.

Higher equities and gold prices kept the aussie trading strongly on Friday

The pound was down 0.4% against the aussie dollar as stronger US equities maintained a level of risk appetite, which supported the higher-yield currency.

• In addition to stronger stocks, the aussie also found support from a continued rise in the price of gold as investors looked to diversify their trading portfolios in order to hedge against a weak US dollar.
  
• Gold climbed to an all-time high as investors stepped up purchases of the precious metal on speculation that the dollar will extend its decline.
  
• However, the world's top mining companies have warned today that global production of gold is likely to resume a long-term decline in coming years, which may prove a burden to the aussie in the future.
  
• In trading this morning, the pair are holding steady, with investors awaiting comments from Obama's visit to China where the valuation of the Chinese yuan is being discussed.
  
• Given the close trading relation between China and Australia, the strength of the yuan has strong influence on that of the aussie.

The euro traded higher than the dollar at the end of last week following positive EU growth data

The single currency was up half a cent against the dollar on Friday, recovering some of its mid-week losses as investors chose to take profits in the greenback.

• The dollar lost ground against most major counterparts on Friday for the first day in three, with strategists attributing the modest weakness to investors taking profits on the greenback's recent bounce.
  
• In the eurozone, data revealed that German GDP expanded 0.7% in the third quarter and French growth was at 0.3%. Although these figures fell short of market expectations, they confirmed continued economic expansion, which lent support to the euro.
  
• The greenback briefly extended losses after data showed that the US trade deficit widened more than forecast, to $36.5 billion in September, enforcing sentiment that rates would remain low for some time.
  
• The dollar also stayed lower as stocks held onto gains after the Reuters/University of Michigan index showed consumer sentiment unexpectedly declined in early November to its weakest level in three months.
  
• The single currency has continued to climb higher this morning, currently up half a percent to regain its positions just below $1.50.

Sterling posted gains against the dollar on Friday and is continuing to make ground this morning

The pound was a cent up against the dollar on Friday as market participants took profits on the greenback's modest bounce earlier in the week.

• The greenback extended losses after data showed that the US trade deficit widened more than forecast, to $36.5 billion in September, and that import prices rose 0.7% last month.
  
• Strategists noted that while trade is not usually a prime driver of currencies, the combination of rising imbalances and extremely low rates is typically a US dollar negative.
  
• The pound rose as a planned merger of British Airways Plc and Iberia Airlines sent the UK's stock market slightly higher and spurred speculation the economy is improving, boosting demand for the currency.
  
• However, sterling buying is commonly seen as market strategy when the price drops to $1.65 rather than speculative buying, as investors are keen to pick up sterling as it falls to cheaper levels.
  
• In trading this morning, the pound has pushed through resistance at $1.67, currently up over half a cent as rhetoric over China's yuan currency policy increased.
  
• Investors will be watching US retail sales data for October released at 13:30, which, if it follows forecasts, could boost risk appetite.

Sterling made its way back towards 1.12 on Friday but has edged down in trading this morning

Sterling enjoyed a slight rally at the end of last week, once again briefly stretching up over 1.12 against the single currency before closing at 1.1188, up 0.2% on the day.

• Sterling recovered some of its two-week losses against the euro on Friday as traders closed short positions in the UK currency ahead of the weekend.
  
• The single currency found itself on the back foot after data showed that the eurozone returned to growth in the third quarter, but at a slower pace than expected.
  
• The euro-zone economy registered quarter-over-quarter growth of 0.4%. The figure fell short of the 0.6% increase forecast by economists, largely due to a weaker-than-expected outcome turned in by both France and Germany, the region's two largest economies.
  
• The pound also found support as a planned merger between British Airways and the Spanish Iberia airline spurred speculation that the economy is improving.
  
• Analysts noted that the slight gain for sterling on Friday showed an unwinding of pessimism that followed the inflation report, although the currency would remain volatile because of the continued uncertainty on the British monetary policy.