Sterling soars to seven-month high against US Dollar

Sterling soared 2.56 cents (1.58%) against the US dollar yesterday to close the day at $1.6443.

• In early trading yesterday, sterling rose by over two cents against the greenback to hit a seven-month high as investor demand for riskier assets increased.
  
• Improved Chinese manufacturing data released overnight drove European equities higher mid-morning, prompting investors to look beyond the safe-haven of the dollar.
  
• Furthermore, better-than-expected UK housing and manufacturing data also drove sterling’s gains. Hometrack’s survey showed house prices in England and Wales were unchanged in May, the first time in 20 months there has been no month-on-month fall, whilst the headline Manufacturing PMI index came in at 45.4 in May, comfortably ahead of the 44.0 predicted.
  
• Sterling’s gains were further extended yesterday afternoon after the release of US ISM manufacturing data, which showed a slowing in the sector’s rate of contraction. It came in at 42.8, up from 40.1 last month.
  
• Strong rises on UK equity markets also fuelled sterling’s gains late yesterday. The FTSE 100 eventually finished the day up 88.25 points to close at 4506.19.
  
• In trading so far today, the pound has retreated from yesterday’s highs as investors turn their attention to Thursday’s Bank of England interest rate decision.
  
• There are no major announcements due in the UK today, whilst in the US, Pending Home Sales (MoM) are out at 15.00 BST.

Euro finishes very slightly down against US Dollar

The euro weakened slightly against the US dollar yesterday, falling 0.01 cents (0.01%) to close the day at $1.4157.

• In early trading yesterday, the euro rose against the greenback as investor appetite for riskier currencies continued.
  
• Strong gains on European equity markets mid-morning, buoyed by improving economic data, encouraged investors to look beyond the safe-haven of the dollar. The euro’s gains were also extended following the release of better-than-expected final eurozone PMI manufacturing index figures, which climbed to a seven-month high of 40.7 in May, up on the provisional estimate of 40.5.
  
• The single currency’s gains were also buoyed by the release of US ISM manufacturing data, which showed a slowing in the sector’s rate of contraction. It came in at 42.8, comfortably ahead of the 42.2 expected, further improving sentiment that a global economic recovery may soon be underway.
  
• However, the euro ran out of steam in late trading yesterday as some traders booked profits. It eventually finished the day very slightly down.
  
• In trading so far today, the euro has weakened against the greenback as investors brace themselves for the release of important US housing data, a core economic driver, later today. Pending Home Sales (MoM) are out 15.00 BST. There are no major announcements out in the eurozone today.

Investors favour pound over aussie

The pound gained over a cent in value against the Australian dollar yesterday as improved risk appetite in the market favoured the higher risk pound.

• News that China’s manufacturing sector expanded in May for the third consecutive month boosted optimism in markets.
  
• The FTSE 100 had a positive day, following earlier gains in Asia, finishing the day 2% up as investors risk appetite grew.
  
• As widely forecast, the Reserve Bank of Australia kept their interest rate on hold at 3% overnight – the central bank did however suggest that there is scope for further easing of interest rates in the future, which may put the Aussie under selling pressure.

Sterling finishes slightly up against the Kiwi

Sterling made modest gains against the New Zealand dollar yesterday, as the pound gained from broader market movements.

• Global equity markets rose yesterday as investors speculated that the worst of the recession may be behind us, and that a bull market may be returning.
  
• The pounds gains were limited however as commodity prices continued to firm – commodities account for 70% of New Zealand’s exports.
  
• The Kiwi may come under selling pressure in the medium term as investors speculate that last month's gains may have come too quick.

Sterling weakens slightly against euro on Friday

The pound weakened slightly against the euro on Friday by 0.05 cents (0.04%) to close the day at 1.1430.

• In early trading on Friday, the pound strengthened slightly against the euro after better-than-expected UK housing data buoyed investor hopes that an economic recovery in the UK may soon be underway. Nationwide’s survey showed UK house prices unexpectedly rose 1.2% during April.
  
• Strong London equity market performance also contributed to sterling’s gains early on, with the FTSE up 1.2% mid-morning.
  
• However, profit taking capped sterling’s gains mid-afternoon. In addition, the GfK/NOP UK consumer confidence survey hampered the pound’s progress as it came in at -27 for the second month in a row, ending three months of consecutive gains. As a result, sterling finished slightly down on the day.
  
• In trading so far today, the pound has strengthened against the single currency as investors eye important data and interest rate announcements out this week.
  
• There are no major announcements due in the eurozone today, however at 09.30 BST in the UK, Manufacturing PMI data is out.

Sterling finishes May on a high

The pound strengthened considerably against the US dollar on Friday, finishing the day up 2.44 cents (1.53%) at $1.6187.

• In early trading on Friday, sterling rose to a near seven-month high against the greenback as signs the global recession may have passed its worst prompted investors to seek riskier assets.
  
• Earlier worries surrounding the US government’s triple-A credit rating also subsided mid-morning on Friday after a series of successful US Treasuries auctions indicated healthy demand for US debt.
  
• Better-than-expected UK housing data released by Nationwide also buoyed appetite for the riskier pound on Friday morning. Its survey showed house prices rose by 1.2% in April.
  
• However, weaker-than-forecast US Preliminary GDP figures released mid-afternoon cooled the pound’s rally to some extent. This month’s reading of -5.7% was worse than the -5.5% analysts had been expecting, although it did represent an improvement on the -6.1% the month before.
  
• Nevertheless, the pound posted a considerable increase against the greenback over the day, capping an impressive 8.5% rise against the US currency in May.
  
• In trading so far today, the pound resumed its rise against the dollar as improved risk sentiment in the market continues.
  
• In the UK, Manufacturing PMI figures are due at 09.30 BST, whilst at 15.00 BST in the US, ISM Manufacturing PMI data is out.

Euro finishes strongly up against the US Dollar on Friday

The euro strengthened considerably against the US dollar on Friday by 2.15 cents (1.54%), finishing the day at $1.4158.

• In early trading on Friday, the euro hit its highest level against the greenback since early January after improved risk appetite swept the market. In particular, healthy demand for US debt after a series of successful US Treasuries auctions aided the single currency’s gains.
  
• Strong rises on European equity markets also weakened demand for the safe-haven of the dollar as investor demand for riskier assets increased.
  
• However, weaker-than-expected Preliminary GDP figures out in the US mid-afternoon tempered risk appetite in the market to some extent. This month’s reading of -5.7% was a slight improvement on the -6.1% the month before but much worse than the -5.5% analysts had forecast.
  
• Nevertheless, the euro still finished well up against the dollar on the day, closing at its highest level since 18 th December last year and marking an impressive 6.7% rise in May.
  
• In trading so far today, the single currency has resumed its rise against the greenback as improved risk sentiment continues to sweep the market.
  
• There are no major announcements out in the eurozone today, whilst in the US, ISM Manufacturing PMI figures are due at 15.00 BST.

Aussie stregthens against sterling

The pound lost ground to the Australian dollar on Friday, and continued to fall over the weekend.

• Sterling ’s fall came on the back of improving risk appetite and rising commodity prices, both of which boosted demand for the aussie dollar.
  
• The flow of information from the US, Japan, Europe and the UK continues to suggest that the intensity of the recession is easing.
  
• Oil closed above $US66 a barrel on Friday, up more than 100% from its lows five to six months ago, and copper prices also rose strongly.
  
• Also, another reason for the rise in the Australian dollar is the return of the carry trade: US investors are selling the US dollar to buy the Australian dollar and get returns well above what they can get in the States.

Kiwi finishes Friday up against the pound

The New Zealand dollar made gains against the pound on Friday, and continued to gain ground overnight as risk appetite improved.

• Growing optimism boosted appetite for risk, improving demand for higher yielding currencies, with the kiwi and the aussie dollar being major beneficiaries.
  
• The kiwi hit new multi-month highs against the US dollar and the euro overnight, and remained well supported against the pound.
  
• Rising commodity prices and renewed interest in carry trades also offered the New Zealand dollar some support.

Euro hits highest level against US dollar this year

The euro hit its highest level against the US dollar since New Year's eve today, as improved risk appetite swept the market. In particular, strong demand for US debt after a series of successful US Treasuries auctions aided the single currency’s rise.

In addition, healthy rises on European equity markets also weakened demand for the safe-haven of the dollar as investor demand for riskier assets increased.