Closing rates update

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Euro strengthens over pound

The pound rose against the single currency yesterday, as gains in share prices and news that British bank Barclays may sell a fund management unit to boost its capital base improved appetite for the pound. Shares in Barclays rose 22% following the announcement, and news that the bank had a ‘strong start to 2009’ created some confidence in markets and investors duly bought into perceived higher risk currencies such as the pound.

The Bank of England also held its second auction yesterday as part of its quantitative easing policy to boost money supply in the economy. The central bank bought just under £2bn worth of long dated gilts in its auction. Investors will take particular note of the economic confidence survey released by ZEW in Germany this morning, and the direction that equity markets take.

Pound stalls against US dollar

The pound strengthened over the US dollar by 1.01 cents in yesterday's trading to close at the 1.4061 level. The pound's performance was driven by improved sentiment amongst investors, with risk appetite improving as share prices increased. The FTSE 100 index rose 2.9%, with Barclays shares up 22% on news that it was planning to sell its iShares unit to raise capital. This news was welcomed by investors who speculated that the money generated could pay for Barclays' participation in a UK asset protection scheme. Although the pound reached a high of 1.4229 it did pare some of its gains in late trading as demand for the dollar rose despite it being announced that US industrial production fell 1.4% in February.

Today's trading has remained quiet with the market currently sitting around yesterday's close. This is ahead of the announcement of DCLG House Price Index data in the UK and Building Permits, Housing Starts and Producer Price Index figures in the US. Investors are trading cautiously ahead of the announcement of Bank of England minutes and the Fed's interest rate announcement tomorrow. Whilst the US interest rate target is 0.0% to 0.25% and there is no scope to go lower, comments from the Fed will be eagerly anticipated.

Euro continues to perform well over US dollar

The euro rose against the dollar yesterday, hitting a 5-week high amid growing risk appetite after financial ministers from the G20 meeting concluded their summit in Britain over the weekend, vowing to do "whatever is necessary" to fix the global economy, including supervision of freewheeling hedge funds and restoring bank lending by dealing with the shaky securities burdening their finances.

Meanwhile, US Federal Reserve Chairman Ben Bernanke said the US had averted the risk of plunging into a depression, telling CBS' "60 Minutes" in an interview aired Sunday that the recession there would "probably" end in 2009. His comments came ahead of a two-day meeting by the Fed that begins today. The Fed is anticipated by some to announce new methods to spur lending to get Americans spending again. Any decisions will be announced tomorrow.

In the eurozone today the ZEW Economic Sentiment Survey at 10.00 GMT will be of particular significance. In the US, Housing Starts and Producer Price data is due to be announced at 12.30 GMT.

Euro continues to perform well over US dollar

The euro rose against the dollar yesterday, hitting a 5-week high amid growing risk appetite after financial ministers from the G20 meeting concluded their summit in Britain over the weekend, vowing to do "whatever is necessary" to fix the global economy, including supervision of freewheeling hedge funds and restoring bank lending by dealing with the shaky securities burdening their finances.

Meanwhile, US Federal Reserve Chairman Ben Bernanke said the US had averted the risk of plunging into a depression, telling CBS' "60 Minutes" in an interview aired Sunday that the recession there would "probably" end in 2009. His comments came ahead of a two-day meeting by the Fed that begins today. The Fed is anticipated by some to announce new methods to spur lending to get Americans spending again. Any decisions will be announced tomorrow.

In the eurozone today the ZEW Economic Sentiment Survey at 10.00 GMT will be of particular significance. In the US, Housing Starts and Producer Price data is due to be announced at 12.30 GMT.

Pound/Aussie remains flat

The Australian dollar continued to trade within recent ranges against sterling yesterday, with little new economic data released from either country. Despite a small improvement in risk appetite investors remain cautious, particularly ahead of major economic releases later in the week. A recent strong run in equity markets has helped stabilise markets for the time being, however this seems unlikely to last.

Kiwi dollar continues march

The New Zealand dollar consolidated on recent gains as rising stocks helped improve investor risk appetite. However, further gains were capped by local data which pointed to a deepening recession. Fourth quarter manufacturing figures showed sales volumes were the worst on record. Despite a small improvement in the contracting service sector analysts are now forecasting that the economy in the fourth quarter may have contracted at its fastest rate in over a decade.

Pound performs generally well

In the afternoon's trading the pound has given up most of it's earlier gains against the euro as the single currency has responded well to rising stock prices. However the same rising stocks have seen the pound perform well against many currencies, including the dollar dollar and yen. The FTSE 100 currently sits 2.11% up on the day.

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Eurozone data

The following data has just been announced in the eurozone:

Consumer Price Index: +0.4% in Februrary 2009
Consumer Price Index: +1.2% in Februrary 2009 (year on year)

Employment Change: -0.3% in Q4 2009
Employment Change: 0.0% in 2009

This data shows that unemployment did start to increase in the last 3 months of 2009 and that inflationary pressures persist in the eurozone. The pound currently sits 0.8 cents up over the euro on the day at the 1.0908 level.

Improved sentiment sees pound gain over euro

The pound enjoyed a positive finish to the end of last week as brighter investor sentiment boosted riskier assets. Sterling’s gains were capped somewhat as the single currency was still benefiting from the Swiss central bank’s decision on Thursday to weaken their currency, with investors buying into the euro. The pound benefited from some confidence returning to the market as there was the belief that large US banks may be able to survive without nationalisation. Nonetheless, the economic picture in the UK remains poor with unemployment set to surge over the two million level this week, with official figures expected to confirm that unemployment has risen by almost 176,000 in the three months to January.

There are no major announcements due in the UK today, whilst within the eurozone, investors will be particularly interested in the consumer price index figures being released, giving an indication of inflation, and the employment change data due this morning.