Pound makes gains against the euro

The pound strengthened against the euro yesterday, finishing the day at 1.1187.

• In early trading yesterday the pound strengthened against the euro as stronger-than-forecast data released in the UK fanned demand for sterling.
  
• Figures released by the British Retail Consortium showed a 6.3% month-on-month rise in value of sales in shops for April, following increases of 0.1% in February and 0.6% in March.
  
• In addition, stronger-than-expected UK manufacturing and industrial data also improved investor appetite for sterling. Month-on-Month Industrial Production registered at -0.6%, better than the -0.7% forecasted, while Month-on-Month Manufacturing Production came in at -0.1%, up from -0.9% in March. Although the latter represented the biggest quarterly fall in UK production since records began in 1948, investors took it as an encouraging sign that the pace of the UK’s recession may be easing.
  
• However, the pound’s gains were capped to some extent after President of the European Central Bank Jean-Claude Trichet’s comments at a press conference on Monday, where he said policymakers could see the first signs of an economic recovery in the eurozone. Nevertheless, sterling went into lunch well up against the single currency.
  
• However, the surprise announcement of UK unemployment data yesterday afternoon after the Office of National Statistics accidentally released them meant sterling lost some steam in late trading. The figures showed that the number of people out of work in the UK rose to 2.22 million in the first quarter of 2009, taking the total jobless rate to 7.1%. This was the worst unemployment figure since 1996. Also, benefit claimants in April rose 57,100 to 1.51 million.
  
• Nevertheless, sterling strengthened on the day against the single currency as investors, buoyed by the positive data released early in the day, remained confident an economic recovery in the UK may not be too far off.
  
• In trading so far today sterling has pared some of yesterday’s gains, as caution ahead of today’s Bank of England Quarterly Inflation Report, released at 10.30 BST, encouraged some investors to book profits. There are no major announcements due in the eurozone today.

Pound strengthens by over a cent against the US dollar

Sterling strengthened by over a cent against the US dollar yesterday, reaching a 4-month high before finishing the day at $1.5271.

• In early trading yesterday the pound strengthened against the US dollar, as better-than-expected British manufacturing data improved risk appetite in the market. Figures released by the Official of National Statistics showed manufacturing output fell by 0.1% in March, beating consensus forecasts for a 0.8% drop. Investors took this an encouraging sign that the recession was starting to ease, despite the fact it was the largest quarterly drop in UK production since records began in 1948.
  
• Sterling also rose early in the session on the back of strong UK retail sales data released by the British Retail Consortium. They reported a 6.3% rise in the value of sales in shops in April against a year earlier, further building on the 0.6% increase in March.
  
• Elsewhere, the Royal Institute of Chartered Surveyors also released surprisingly positive UK housing data, reporting that enquiries from new homebuyers rose to their highest level since 1999.
  
• More generally, investors took heart from data released in China on Monday night, which showed investment spending rose even though exports fell more steeply than expected, buoying demand for more high-yielding currencies like the pound.
  
• As a result, with risk appetite improving, sterling climbed over 1% in the morning session to hit a four-month high.
  
• In the early afternoon, stronger-than-forecast US Trade Balance data further extended sterling’s gains. Although it was down from last month’s -$25.97 billion, this month’s -$27.58 billion was far ahead of the -$28.90 billion analysts had predicted. This further improved risk sentiment in the market, with investors selling out of the perceived safe-haven of the greenback. Sterling hit a session high of $1.5350 as a result.
  
• However, sterling’s gains were capped mid-afternoon after the accidental release of British unemployment data a day early. It revealed the number of people out of work in the UK rose by 244,000 to 2.22 million in the first three months of 2009, the biggest quarterly rise since 1981. This took the total jobless rate to 7.1%.
  
• Despite this, though, sterling rose strongly on the day, finishing the day up over a cent against the greenback.
  
• Sterling has pared some of yesterday’s gains in trading so far today, ahead of some important data releases from both the UK and the US. In the former, the Bank of England’s Quarterly Inflation Report is due for release at 10.30 BST, followed by a speech by Governor Mervyn King, whilst in the latter Month-on-Month Retail Sales figures for April are out at 13.30 BST.

Euro touches 7-week high against the US dollar

The euro strengthened against the US dollar yesterday, climbing to a 7-week high before finishing the day at $1.3647.

• In early trading the euro strengthened against the greenback, after better-than-expected UK retail sales, housing market and industrial production data buoyed investor demand for riskier currencies.
  
• The single currency also rose early yesterday on the back of positive comments from the European Central Bank President made the previous day. Jean-Claude Trichet said the eurozone’s economy is at an “inflection point” and was showing tentative signs of recovery.
  li>Also boosting demand for more high-yield currencies like the euro was the news that investment spending in China had soared, even though its exports fell more sharply than expected. This further fanned risk appetite in the market, helping the euro hit a seven-week high against the dollar just before lunch.
  
• The single currency’s gains were extended following the release of much better-than-expected US Trade Balance figures early yesterday afternoon. This month’s reading of -$27.58 billion was far ahead of the -$28.90 billion analysts had forecast.
  
• As a result, the single currency finished up markedly on the day, its fourth rise in five days against the greenback.
  
• The euro has resumed its rise against the dollar this morning as improved risk sentiment in the market continues. There are no important announcements due in the eurozone today, while in the US Month-on-Month Retail Sales figures for April are due at 13.30 BST.

Kiwi dollar remains range bound

The New Zealand dollar remained largely range bound against the pound yesterday.

• The release of better-than-expected production data from the UK was offset by the early release of employment data showing the worst unemployment rate since 1996.
  
• The kiwi dollar continued to be underpinned by renewed investor risk appetite, which has helped commodities as well as high yielding currencies.
  
• The kiwi's direction is likely to continue to be directed by the ebb and flow of equity markets, which is still being used as a barometer for risk appetite.

Australian dollar holds its ground against the pound

The Australian dollar managed to hold its ground against sterling yesterday, despite the pound receiving support from stronger than expected data from the UK.

• The pound climbed back up past the A$2 level yesterday, following the release of better than expected production figures and retail sales data.
  
• However, the early release of employment figures in the afternoon dampened sterling’s gains, pushing the pound below A$2 again after the figures showed the ILO unemployment rate rose to 7.1 percent, from 6.7 percent the previous month.
  
• Reaction to the Australian Federal budget remained muted, as its economic projections and forecast deficit was within analysts’ expectations. Investors will focus on the BoE today, with the release of their inflationary report due, along with a speech by Governor Mervyn King.

Sterling hits four-month high against the US dollar

The pound has climbed to a four-month high against the US dollar, and the rate at present is in the top 1% of this year's range. Comments by George Soros, together with the recent bull rise on the FTSE, have driven the pound’s strength recently. Caxton FX Analyst David Clements says, "the market could continue to head higher due to increasing confidence in the UK economy, however last time it traded at these levels sterling fell to below $1.35 in less than two weeks."

Sterling continues it's slide against the euro

Sterling continued its slide against the euro yesterday, finishing at 1.1129.

• In early trading yesterday the euro rose against the pound, as investors continued to absorb last week’s policy decisions from the Bank of England and the European Central Bank. Most appear to consider the BoE’s decision to extend its quantitative easing program by an another £50 billion as negative news, whereas the ECB’s decision to cut interest rates and boost credit through the purchase of covered bonds is being seen as decisive.
  
• Wednesday’s BoE quarterly inflation report also contributed to the single currency’s early gains, with some analysts forecasting further bad news for the UK economy.
  
• Speculation ahead of HSBC’s first quarter results also contributed to the selling pressure on the pound yesterday morning, primarily because the UK is so dependent on the banking sector.
  
• When they came, the bank’s results were poorly received by the market after it admitted profits were swelled by record results in its investment bank. This further extended sterling’s losses yesterday afternoon as the FTSE 100 fell markedly.
  
• In addition, HSBC’s chief executive, Michael Geoghegan, warned it was too early to see any ‘green shoots’ in terms of an economic recovery, despite an increase in consumer confidence. This further weighed on the pound into the afternoon as the FTSE 100 fell further, eventually closing the day down 26.59 points at 4435.50.
  
• In early trading so far today, sterling has continued to weaken against the euro as investors continue to digest last week’s interest rate decisions and yesterday’s banking results.
  
• There are no major announcements due in the eurozone today, however at 9.30 BST there are some important pieces of data out in the UK, namely the Goods Trade Balance for March, Year-on-Year and Month-on-Month Industrial Production and Manufacturing Production figures and March’s Total Trade Balance.

Pound weakens against the US dollar as risk aversion returns

The pound weakened against the US dollar yesterday, finishing the day at $1.5117.

• In early trading yesterday the pound weakened from a four-month high against the US dollar, as investors continued to digest last week’s “aggressive” BoE decision to extend its quantitative easing programme by an another £50 billion.
  Sterling ’s losses were also driven early on by falls in London equity markets ahead of European banking results later in the day. At one point the FTSE 100 was down 0.7%.
  
• Although there were no major announcements due in the UK yesterday, analysts expect data released later this week – including labour market and industrial production data – to be weak, further contributing to the downward selling pressure on the pound yesterday morning.
  
• HSBC’s admission that its first quarter profits would have been down without accounting gains on its debts weighed on London equity markets early yesterday afternoon, with the banking sector particularly weak. The chief executive’s admission that the recession has ‘got some time to go’ did little to stem these losses.
  
• With the UK’s economic recovery far from certain, investors were reluctant to push riskier assets even higher and instead booked profits, particularly in banking shares and oil. Sterling weakened further mid-afternoon as a result, with investors looking to the safe haven of the greenback for their capital.
  
• In trading so far today the pound has weakened slightly against the dollar, as risk-aversion continues ahead of the release of important data on both sides of the Atlantic today.
  
• In the UK at 9.30 BST, the Goods Trade Balance for March, Year-on-Year and Month-on-Month Industrial Production and Manufacturing Production figures and March’s Total Trade Balance is due. In the US, Trade Balance figures will be released at 13.30 BST.

US dollar strengthens against the euro on renewed risk aversion

The US dollar strengthened against the euro yesterday as risk-aversion returned to the market, finishing the day at 1.3580.

• In early trading yesterday the US dollar rose slightly against the euro, as investors became cautious ahead of HSBC’s first quarter results. This speculation dented last week’s positive sentiment on the financial markets, causing investors to buy into the perceived safe-haven of the greenback early on.
  
• Although significantly better than the last three months of 2008, when the results came they did little to ease investor nerves into lunchtime, as the bank admitted its figures were boosted by one-off gains.
  
• However, a Chinese government report showing urban fixed-asset investment rose at the fastest pace in more than two years spurred demand for higher-yielding currencies like the euro mid-afternoon.
  
• The single currency’s rally mid-afternoon was further extended following a press conference held by President of the ECB, Jean-Claude Trichet, where he said policymakers could see the first signs of an economic recovery: “As far as growth is concerned, we’re around the inflection point in the cycle, that’s the sentiment.”
  
• However, the euro’s gains were wiped out late in the day yesterday as general risk-aversion returned to the market following further falls on European equity markets. Investor speculation surrounding the eurozone’s GDP and CPI figures due on Friday also weighed on the euro as some feared the region may be some way off an economic recovery.
  
• In trading so far today the euro has pared all of yesterday’s losses against the dollar, as investors continue to digest last week’s “decisive” ECB policy decision.
  There are no major announcements due in the eurozone today, whilst in the US the Trade Balance is out at 13.30 BST.

New Zealand dollar's recovery stalls

The New Zealand dollar's recovery stalled yesterday, as falling equity and commodity prices saw investors tighten up on their risk exposure.

• Many analysts believe the kiwi’s gains are overdone and that domestic economic fundamentals will start to drive the currency again.
  
• Although there are some early signs that the decline in economic activity may be levelling off the short term outlook for the economy is still fairly gloomy.
  
• More negative domestic data should therefore allow the pound to recover further ground against the kiwi.