Sterling gains against Polish zloty yesterday

Sterling has strengthened against the Polish zloty over the last week despite last month’s inflation figure coming in better-than-expected at 3.6%, down from 4% in April and below analyst’s predictions of 3.8%. This bolstered hopes of a Polish interest rate cut this month, following holds in April and May because of higher inflation and a weaker zloty. Yesterday, the Polish government approved a cautious 2010 budget outline which forecasted GDP growth of 0.5% and average annual inflation of 1%. Poland has suffered a sharp economic slowdown since Christmas, with GDP growth expected to reach just 0.2% this year, down sharply from 4.9% in 2008 but still better than most others in recession-ravaged eastern Europe. The 2010 Polish budget outline also envisaged unemployment to reach 13.8% by end-2010, up from around 11 percent now. All these factors combined, and the resulting speculation over how much money the Polish government will have to borrow next year, weighed on the zloty yesterday. Crucially, the centre-right government has not yet set the level of its 2010 budget deficit, which may prove critical for both Poland's eurozone entry ambitions and for the zloty and bond prices. In terms of the UK, improved sentiment surrounding its economy, prompted by more positive UK housing and industrial production data, has seen sterling gain against a basket of currencies recently, of which the Polish zloty is one.

Sterling closes at year-high against euro

Sterling hit a year-high against the euro yesterday, rising 0.94 cents (0.80%) to close the day at 1.1823.

• In early trading yesterday, sterling continued its rally against the single currency after weak eurozone employment figures prompted investors to question the health of the region’s economy. The region lost 1.22 million jobs during the first three months of 2009.
  
• An upbeat report released by the Confederation of British Industry also bolstered demand for the pound yesterday, after it predicted the UK economy would stabilise in the fourth quarter of the year, earlier than previous estimates, and that growth would return in early 2010.
  
• In trading so far today, sterling has pared some of yesterday’s gains as investors eye important data out later today.
  
• In the UK, CPI inflation figures are out at 09.30 BST today, whilst in the eurozone, German ZEW Economic Sentiment data and inflation figures are due at 10.00 BST.

Sterling falls over a cent against US Dollar

Sterling weakened by 1.22 cents (0.74%) against the US dollar yesterday, finishing the day at $1.6319.

• In early trading yesterday, sterling fell against the greenback after Russia’s finance minister expressed confidence in the US currency. Speaking at the G8 meeting over the weekend, Alexei Kudrin said the dollar’s role as the world’s primary reserve currency is safe for now.
  
• However, the greenback’s gains were cap ped to some extent after a report by the CBI further improved confidence in the UK economy. It forecasted a return to growth at the start of 2010.
  
• Nevertheless a fall on UK equities kept up the downward pressure on sterling in late trading. The FTSE 100 eventually finished the day down 115.94 points (2.61%).
  
• In trading so far today, the pound has risen slightly against the dollar as investors consider recent data.
  
• In the UK, CPI data is out at 09.30 BST today, whilst in the US Building Permits data is due at 13.30 BST.

Euro down over 2 cents vs. USD

The euro weakened considerably against the US dollar yesterday, dropping 2.12 cents (1.51%) to finish at $1.3802.

• In early trading yesterday, the euro weakened by over a cent against the dollar after Russia’s finance minister reaffirmed the greenback’s status as the world’s premier reserve currency. Russia holds roughly 30% of its $404.2 billion foreign exchange reserves in US Treasuries, making it the fifth-largest holder of US government debt.
  
• Also contributing to the downward pressure on the single currency yesterday were first-quarter eurozone employment figures, which revealed a 1.22 million job loss over the period.
  
• So far today, the euro has pared some of the losses it made yesterday as investors continue to digest recent economic announcements.
  
• In the eurozone, German ZEW Economic Sentiment data and inflation figures are out at 10.00 BST today, whilst in the US Building Permits data is due at 13.30 BST.

Sterling hits two-week high vs. aussie

The Australian dollar reached two-week lows against sterling yesterday after equity markets and commodity prices fell.

• The high yielding and commodity based aussie was one of the hardest hit as investors again became risk averse.
  
• However, confidence in an imminent UK recovery still remains shaky, particularly after IMF chief Dominique Strauss-Kahn stated that although there were signs that the world economy may be slowly crawling out of recession, the worst of the economic crisis was still not over.
  
• Today investors will eye key UK inflation data for further direction.

Kiwi down against sterling as risk appetite eases

The New Zealand dollar dropped against sterling yesterday as falling equities markets hit demand for higher-yielding currencies.

• The Kiwi was also hurt by manufacturing data which suggested that the local economy in the first-quarter is likely to have again contracted sharply.
  
• However, the Kiwi’s losses were contained by last week’s central bank decision to keep interest rates on hold.
  
• The Kiwi's direction in the next few days is likely to be guided by broader market movements.

Sterling finishes Friday slightly down against euro

Sterling weakened slightly against the euro on Friday, dropping 0.27 cents (0.23%) to close the week at 1.1729.

• In early trading on Friday, sterling fell against the single currency as traders booked profits from its recent rally. The prospect of G8 finance ministers meeting over the weekend meant investors were particularly keen to square off positions before then.
  
• The downward pressure on sterling was also aided following dovish comments from incoming Bank of England policy-maker Paul Fisher, who said the UK should be wary of complacency and that economic output was likely to fall in the second quarter.
  
• In trading so far today, the pound has strengthened against the euro as investor confidence about the UK economy’s recovery remains high.
  
• There are no major announcements due in the UK or eurozone today.

Sterling falls heavily after recent rally vs. US dollar

The pound fell by 1.48 cents (0.89%) against the US dollar on Friday, finishing the day at $1.6441.

• In early trading on Friday, sterling weakened considerably against the dollar as traders booked profits ahead of the G8 meeting over the weekend.
  
• Cautionary comments from UK Chancellor Alistair Darling also contributed to sterling’s fall mid-afternoon, after he warned that rising oil prices had the potential to be a “huge problem” for any recovery.
  
• So far today, the pound has resumed its slide against the greenback as investors eye important data out later this week.
  
• There are no major announcements due in the UK today, whilst in the US TIC Long-Term Purchases data is out at 14.00 BST.

Euro falls against US dollar as US Treasuries deemed safe

The euro weakened by 0.94 cents on Friday against the US dollar to finish the day at $1.4014.

• In early trading on Friday, the euro dipped against the dollar after a drop in eurozone industrial output reminded investors the region’s economy still had some way to go before it comes out of recession. It dropped 21.6% in April from a year ago, a record fall and well below the 20.2% dip expected.
  
• Concern earlier in the week that international reserve managers were set to diversify away from the US dollar also eased on Friday, aiding the greenback’s recovery. Comments from Kaoru Yosano, Japan’s finance minister, that his trust in US Treasuries was “absolutely unshakeable” rekindled demand for the US currency.
  
• In trading so far today, the euro has fallen sharply against the dollar as traders continue to book profits following gains in recent days.
  
• There are no major announcements out in the eurozone today, whilst in the US TIC Long-Term Purchases data is due at 14.00 BST.

Aussie strengthens initially after G8 meeting

The Australian dollar strengthened against sterling overnight as the outcome of this weekend’s G8 meeting held no surprises in terms of currency.

• Although there is still some support for investors taking on more risk, market optimism still remains guarded.
  
• So despite some signs that the UK economy may be starting to bottom out, investors will likely remain cautious until there are signs of economic growth, rather than diminishing contractions.
  
• No significant data is due out of Australia or the UK today so direction is likely to come from broader market movements.