Kiwi traded strongly yesterday as risk appetite was buoyed follwoing an encouraging announcement from the Bank of America

The kiwi dollar was higher against a broadly weaker sterling, which came under pressure following weak economic figures.

• The UK services sector data revealed that the industry expanded at a slower rate than in previous months, breaking its upward trend, and dulling demand for the pound.
  
• The kiwi was also buoyed as the safe haven appeal of the US dollar and Japanese yen came under pressure following an announcement from the Bank of America to repay bailout funds.
  
• The New Zealand currency climbed by just over a cent, but was unable to push higher as weak manufacturing data from the US undermined risk appetite.
  
• The pound is up in early trading though as investors pare back risky bets ahead of important US employment figures.

A weak sterling edged lower against the aussie yesterday but investors are paring back their risk trades this morning

The pound slipped back below 1.79 against the aussie dollar, under pressure from weak UK services data and as positive news from the Bank of America boosted risk.

• In early trading, the Bank of America announced that they are going to start repaying taxpayer bailout funds, which gave a boost to investor confidence, lifting perceived riskier currencies to the detriment of the safe-haven currencies.
  
• In the UK, weaker-than-expected services sector data raised concerns over the strength of the economic recovery, which put the pound on the back foot throughout the day.
  
• In trading this morning though, the price is moving back in sterling's favour as investors lock in profits to protect themselves against sharp market moves before key US employment data later this afternoon.
  
• The monthly non-farm payrolls data tends to spark choppy trading and investors typically turn cautious ahead of its release, exiting long positions in "riskier" currencies.

The euro trimmed stronger early gains after weak US data saw investors pare back risky bets

The euro rose to a 16-month high in early trading, but pared back its gains against the dollar, to close just 0.05% higher after weak data from the US offset risk appetite.

• The dollar was under broad selling pressure in the morning after the Bank of America announced it will repay $45 billion of funds received under the Troubled Asset Relief Program.
  
• The single currency received a further boost, spiking briefly over $1.51 following the European Central Bank's announcement that it will start to unwind extreme stimulus measures that it considers are no longer appropriate now that the recession is easing.
  
• The ECB President, Jean-Claude Trichet, said that the December installment of the 12-month refinancing operation for banks would be the last.
  
• However, the euro trimmed gains as Trichet added the current interest rate remains appropriate, and he reiterated that the winding down of stimulus measures did not signal a change in rates.
  
• Later in the afternoon session, weak data from the US manufacturing sector saw the euro pull back further as concern grew over the strength of the US recovery.
  
• The data helped fuel a late sell off in US equity markets, further sapping risk demand, and supporting a slight dollar rebound.

A broadly weaker sterlingl lost ground to the USD yesterday but has posted gains in trading this morning

The pound dropped nearly a cent against the US dollar following a below forecast figure from the UK services sector.

• Sterling traded strongly against the haven currency in early trading after the Bank of America announced that it was ready to repay taxpayer bailout funds, which boosted investor confidence.
  
• However, the pound came under pressure after data revealed that the UK services sector expanded at a slower rate in November than the market had anticipated.
  
• Although the figure marked the seventh consecutive month above the 50 level, which indicates expansion, the below-forecast headline number was enough to push the pound off an earlier one-week high against the dollar.
  
• In the afternoon, the US currency received support following data that showed US manufacturing contracted in November after growing modestly the prior month, which raised doubts about the strength of the US economy and undermined risk appetite.
  
• The manufacturing data offset more encouraging figures from the Labour market which again showed a slowing rate of unemployment claims this week.
  
• In trading this morning, the pound has risen nearly half a percent as investors await key employment data released in the US at 13:30.

Weak UK data brought the pound down yesterday, but it is recovering losses this morning

Sterling fell by 0.6% against the single currency yesterday after a survey showed Britain's services sector grew more slowly than expected in November.

• The Chartered Institute of Purchasing and Supply activity index fell to 56.6 last month from October's two-year high of 56.9. That was the seventh consecutive month above the 50 level, which indicates expansion, but below expectations for a rise to 57.0
  
• As the services sector is regarded as the driving force of the UK economy, any hesitation in its expansion causes concern for the UK economy and is therefore sterling negative.
  
• The euro received a boost in the afternoon after the ECB announced that it would start to remove loose monetary policies, telling reporters that "not all our liquidity measures are needed to the same extent as in the past."
  
• Trichet hinted about an exit strategy so the knee-jerk reaction was euro positive, but he was explicit in reiterating that the withdrawal of stimulus did not signal a change in interest rates, which capped gains.
  
• This morning the pair is continuing to trade within range, with the price currently hovering back over 1.10.

Kiwi traded strongly yesterday, buoyed by rising risk appetite following improved equity prices

The pound closed down nearly a cent against the kiwi dollar yesterday, but recovered significantly from a one-week low of 2.2712 hit earlier in the day.

• The high-risk kiwi was the biggest gainer against the US dollar yesterday, which spilled over into the kiwi/sterling rate, pushing the former higher.
  
• Global equities rallied strongly as risk appetite came firmly back to the table following a move by the UAE central bank to reassure debts built up by Dubai banks.
  
• The kiwi was also found support as the yen was broadly sold following a decision by the Japanese central bank to extend monetary policy easing measures to fight deflation and help the ailing economy while holding rates at 0.1%.
  
• The New Zealand dollar is continuing to trade strongly today as investors' appetite for riskier higher-yield currencies improves, buoyed by receding worries over Dubai's debt problems and strong Asian equity prices.

Aussie eventually found traction as risk return, but found little support from the 0.25% rate rise

The pound steadied itself against the aussie after a sharp fall on Monday, edging slightly higher yesterday as markets speculated that the RBA may now slow its rate of tightening.

• Early on Tuesday morning, the Reserve Bank of Australia made their third rate rise in row, adding another 0.25% to the base rate, which now stands at 3.75%
  
• In lieu of the news the aussie did back off slightly against sterling, with the price briefly pushing back over 1.80, as investors anticipated that the RBA may now pause and wait for the economic data before they tighten monetary policy further.
  
• However the aussie was able trim losses as global equity markets climbed higher and gold prices hit a record high for the second straight day.
  
• In trading this morning, the aussie is moving higher, currently up over a half a cent, as fears ease over the impact of the Dubai debt crisis, increasing appetite for riskier assets.

Positive data and higher stocks enabled the single currency to consolidate over $1.50

A broadly weaker US dollar dropped 0.5% to the euro yesterday as positive talks in Dubai encouraged demand for higher-risk assets.

• The US dollar came under pressure as concerns eased about Dubai's debt-related problems, which supported a rebound in global equity markets, reducing haven demand.
  
• Leading European indices erased Monday's losses, gaining over 2.0% on the day. The US markets followed suit, opening the session with gains beyond 1% as fears from Dubai World's debt crisis waned with the UAE Central Bank offering financial support to troubled banks in the region.
  
• The dollar trimmed its losses slightly in the afternoon through after the US ISM Manufacturing PMI Index declined to 53.6 in November from 55.7 in October, a somewhat larger decline than the 55.0 expected by the analysts.
  
• The data did show that manufacturing activity continued to expand in November though, limiting the haven appeal.
  
• Markets will be watching an important US employment figure released today at 13:15, which is expected to show that 155,000 jobs were lost in November, a near 25% improvement on October.

As concerns over Dubai ease, the haven appeal of the USD is beginning to soften

The pound advanced against the dollar yesterday, up 1.0%, as UK house prices continued to rise and as concerns eased that a delay in Dubai's debt payments would hurt UK lenders.

• The pound snapped three days of losses against the US currency after Nationwide Building Society said the average cost of a home in the UK increased 0.5% in November. The data offset a larger than expected decline in the manufacturing sector.
  
• Meanwhile, Dubai World began negotiations to restructure about $26 billion in debt and said the remainder of its $59 billion of liabilities was on "a stable financial footing."
  
• Sterling managed to extend gains after US data showed the manufacturing sector grew in November, though at a slower pace, while pending home sales rose to a three and a half year high in October.
  
• US pending home sales rose 3.7% in October, against market expectations of a decline of about 0.6%, which shows that construction activity in the US might be about to come out of a long lasting slump. The greenback softened on the improved economic outlook.
  
• A strong showing in global equity prices also supported a move away from the US currency, with the FTSE up 2.3% and the Dow Jones also closing up well over one percent.

The pound edged higher against the euro yesterday, buoyed by strong equity prices

Sterling made up over half a cent on the single currency, erasing losses incurred at the beginning of the week, to close marginally above 1.10.

• In early trading, a Nationwide survey revealed that UK house prices are continuing rise, increasing by a further 0.5% in November, which boosted demand for the pound and offset weaker manufacturing PMI data.
  
• UK house prices have now risen for the seventh consecutive month, helped by better-than-expected news from the job market.
  
• The UK manufacturing purchasing managers' index fell to 51.8 in November, some way below both the market forecast of 54.0 and the previous month's revised figure of 53.4.
  
• Sterling came under pressure on the data, but analysts said that a general move towards risk as global equity markets surged, led to an appreciation of sterling.
  
• In addition, although the manufacturing figure was weaker-than-expected, it still shows that the industry is expanding, encouraging the consensus that the UK pulled out of recession this quarter.
  
• So far today the pound is trading slightly lower although the pair are likely to remain relatively range bound, hovering around 1.10, as there are no major economic announcements in either the eurozone or the UK.