Kiwi loses ground against aussie & sterling

The New Zealand dollar lost ground against the aussie and sterling yesterday, as investors largely focused on the New Zealand government budget due on Thursday.

• However, the kiwi recovered ground sharply against the pound overnight, after the National Bank of New Zealand's monthly survey of business confidence showed that confidence is up across all business segments.
  
• But the New Zealand dollar’s gains were cut short after dairy giant Fonterra cut its forecast for milk prices, bad news for the dairy sector in New Zealand.

Aussie strengthens back against sterling

The Australian dollar strengthened back against sterling yesterday, after a lack of domestic data saw investors concentrate on equity markets and the US.

• A rise in US consumer confidence, and a subsequent move up in equity markets, saw an increased demand for riskier assets.
  
• This helped support the high yielding aussie, and movements were also exacerbated by continuing thin trade as traders returned to work in the UK and US.
  
• Given the lack of major economic data out of the UK this week direction is likely to continue to come from equity market movements and market confidence.

Euro weakens against greenback

The euro weakened against the US dollar yesterday by 0.29 cents (0.21%), closing the day at $1.3984.

• In early trading yesterday the euro weakened by over a cent against the dollar, following news that German regulator BaFin had warned that toxic debt of the country’s banks would blow up “like a grenade” unless they took advantage of government bad-bank plans to prepare for the next phase of the crisis.
  
• However, the euro clawed back some of its earlier losses yesterday afternoon following the release of better-than-expected US consumer confidence data yesterday afternoon. The Conference Board consumer confidence index rose to 54.9 in May from an upwardly revised 40.8 in April. This was much stronger than the 42.0 analysts had been forecasting. Nevertheless, the single currency still finished the day slightly down against the dollar.
  
• In trading so far today the euro has resumed its slide against the greenback, as investors continue to speculate over how far off an economic recovery the eurozone may be following yesterday’s report questioning the health of the German banking system.
  
• There are no major announcements due in the eurozone today, whilst in the US Existing Home Sales data is out at 15.00 BST.

Sterling rose against US dollar yesterday

Sterling strengthened against the US dollar yesterday by 0.18 cents (0.11%), finishing the day at $1.5924.

• In early trading yesterday, sterling weakened against the greenback as traders booked profits following the pound’s rally last week. Early falls on global equity markets also contributed to sterling’s falls.
  
• News of more missile launches by North Korea also triggered safe-haven demand for the dollar, with investors selling off the riskier pound.
  
• However, stronger-than-forecast US consumer confidence data released yesterday afternoon drove demand for sterling, pushing it into positive territory. The Conference Board’s index rose from an upwardly revised 40.8 in April to 54.9 in May, well ahead of the 42.0 analysts had been expecting.
  
• In trading so far today, the pound has resumed its rise against the greenback as improved risk sentiment continues to flood the market.
  
• In the US, Existing Home Sales data will be released at 15.00 BST today. There are no major announcements due in the UK.

Sterling strengthened vs. single currency yesterday

The pound strengthened against the euro by 0.38 cents (0.33%) yesterday to finish the day at 1.1385.

• In early trading yesterday sterling strengthened against the euro, after news that Germany’s financial regulator BaFin had warned that toxic debt of the country’s banks would explode “like a grenade” unless they accepted government bad-bank plans to prepare for the next phase of the crisis.
  
• The pound’s gains were extended yesterday afternoon after London equity markets pared early losses to head into positive territory. The shortage of economic data out in the UK this week means that investors are likely to take their lead from equities for the foreseeable future. The FTSE 100 eventually finished the day up 46.43 points at 4411.72.
  
• In trading so far today sterling has continued its rise against the single currency after Asian stocks hit their highest level in more than seven months overnight.
  
• There are no major announcements due in UK or eurozone today.

Sterling finishes down against the euro

The pound weakened against the euro yesterday by 0.35 cents (0.31%), finishing the day at 1.1347.

• In a quiet day’s trading because of the UK Bank Holiday, the euro strengthened against sterling on Monday as some investors took advantage to push sterling lower.
  
• This move came despite worse-than-expected German Ifo Business Climate figures, which revealed a rise to just 84.2 this month from 83.7 in April, well below the 85.1 analysts had predicted.
  
• On Friday, the pound weakened against the euro after Thursday’s announcement that a ratings agency had lowered its UK outlook from “stable” to “negative” reduced investor appetite for the UK currency.
  
• Standard & Poor’s justified their decision to lower its rating based on the fact that UK government debt could near 100% of GDP. Sterling’s fall came despite S&P affirming that they were not looking to cut Britain’s ‘AAA’ long-term and ‘A-1+’ short-term sovereign credit ratings.
  
• Elsewhere, data released on Friday morning showed the UK economy contracted an unrevised 1.9% in the first three months of the year.
  
• In trading so far today, the pound has pared all of Monday’s losses against the euro after a report in The Daily Telegraph revealed that German regulator BaFin had warned that toxic debt of the country’s banks would blow up “like a grenade” unless they took advantage of government bad-bank plans to prepare for the next phase of the crisis.
  
• There are no major announcements due in the eurozone or UK today.

Pound weakens slightly against US dollar in quiet trading

The pound weakened against the US dollar yesterday by 0.28 cents (0.18%), closing the day at $1.5906.

• In a light day’s trading because of the public holiday in both the US and UK, sterling weakened slightly against the greenback as some investors booked profits from last week’s healthy rise.
  
• In early trading on Friday, the pound continued its rise against the dollar after concerns surrounding the US’s triple-A sovereign credit rating surfaced. On Thursday, rating agency Standard & Poor’s downgraded its UK outlook from “stable” to “negative”. This sparked broad selling of American stocks and bonds on Friday as fears that record US deficits could lead to a similar downgrade.
  
• Another ratings agency, Moody’s, added to the downward pressure on the greenback after it admitted that although it was comfortable with its triple-A sovereign rating for the US at the moment, it was not guaranteed forever.
  
• In trading so far today, the pound has continued its slide against the dollar as investors await US Treasury auctions to test the strength of market appetite for dollar assets.
  
• There are no major announcements due in the UK today, whilst in the US CB Consumer Confidence data is released at 15.00 BST.

Euro posts small gains against US dollar in light trade

The euro strengthened by 0.17 cents (0.12%) against the US dollar yesterday, finishing the day at $1.4013.

• In a quiet day’s trading because of the American public holiday, the euro strengthened slightly against the greenback as risk appetite in the market continued.
  
• In early trading on Friday, the single currency strengthened against the dollar after investors speculated that the US’s sovereign rating could be downgraded by ratings agencies. Standard and Poor’s decision on Thursday to cut its UK outlook from “stable” to “negative” led many to question which other major nations were susceptible to downgrades.
  
• Although another agency, Moody’s, said it was happy with the US’s ratings at the moment, investors still speculated that it could suffer a downgrade because of its government’s high levels of borrowing. This sent the euro into positive territory against the dollar as investors sold off US assets.
  
• In trading so far today, the euro has weakened against the dollar following news that German regulator BaFin had warned that toxic debt of the country’s banks would explode “like a grenade” unless they took advantage of government bad-bank plans to prepare for the next phase of the crisis.
  
• There are no major announcements due in the eurozone today, whilst at 15.00 BST in the US CB Consumer Confidence data is out.

New Zealand dollar remains well supported

The New Zealand dollar remained well supported against both sterling and the aussie yesterday, as markets awaited the release of a host local economic data, starting with Trade Balance figures released overnight.

• New Zealand Trade Balance data revealed a third consecutive monthly trade surplus in April, while the annual deficit narrowed to NZ$4.1 billion.
  
• This could be the start of a volatile period for the kiwi, with events culminating in the government’s budget on Thursday.
  
• Pressure remains on the government to produce a balanced budget which will appease ratings agencies. Failure to do so may threaten the country’s AA+ credit rating, which would put further pressure on the kiwi.

Australian dollar trades within recent ranges

The Australian dollar traded within recent ranges against sterling yesterday, as a public holiday in the UK kept trade thin.

• Recent optimism over the possible recovery of the world economy, and the subsequent rise in risk appetite, are now starting to dwindle.
  
• More positive economic data to support the view that the world economy is recovering significantly is likely to be needed to extend demand for riskier assets.
  
• If positive data is not forthcoming then the optimism that has supported the aussie in recent weeks could diminish further, undermining the higher yielding currency.