Bearish sentiment towards the pound on Friday allowed the kiwi to make substantial gains

The kiwi dollar climbed another 1.2% on Friday, as demand for the high yield currency remained strong in the wake of positive economic data.

• Investors continued to move their funds into the riskier currency on Friday as data in the US revealed a strengthening economic recovery.
  
• Selling pressure on the pound was also high on Friday as comments from the BoE revealed their willingness to see the currency remain weak, undermining investor confidence.
  
• The kiwi also received support from a slight rise in oil prices. The New Zealand dollar tends to fair well when commodity prices are on the up owing to the nature of the economy.
  
• The kiwi has retreated in trading this morning though as investors turned away from riskier assets following hefty losses in the stock markets.
  
• Stocks turned sharply lower on fears over the strength of the economic recovery and concerns that markets had reached their peaks, which has enabled the pound to recover around 0.1% so far today.

The pound has reversed recent losses against the aussie, supported by rising risk aversion

The pound lost another 1.0% to the aussie dollar on Friday to close at 1.8373, as selling pressure remained strong.

• The aussie dollar reached a twenty-four year high against the pound on Friday, as King’s comments continued to weigh heavily on the pound.
  
• On Thursday, the BoE governor made it clear that he was not too concerned about the current weakness of the pound, and that he was in fact in support of its current value in order encourage a rebalance towards an export led economy.
  
• The news reaffirmed that interest rates would remain low for some time, which encouraged investors to sell the pound in favour of the high-yielding aussie.
  
• In trading this morning however, the aussie has capped its gains as weaker Asian stocks, soften demand for the Australian currency.
  
• Rising risk aversion has also sent the price of gold back below $1000 per ounce, which has put further pressure on the aussie, with pair currently trading steadily around Friday’s closing price.

The euro made ground against the dollar on Friday, but has relinquished its gains this morning

The euro made gains on Friday, following a two day slide, buoyed by improving economic data in the US, and closing at 1.4689.

• The single currency initially lost ground against the greenback as poor data on US core durable goods orders initiated a slight dollar rally.
  
• However, the euro erased early losses after data showed US consumer sentiment improved in September while sales of US homes edged higher in August.
  
• Consumer sentiment rose to its highest point since February 2008, supporting a rise in stock indices, which picked up from earlier losses, adding further support to the euro’s rise.
  
• Additionally, a G20 statement suggested that they aim to continue to provide support for the global economy, which put further selling pressure on the dollar.
  
• In trading this morning though, the single currency has lost nearly 0.5%, dropping back to around 1.4620 following a rise in risk aversion spurred by the Asian markets.

The pound fell below $1.60 on Friday, and rising risk aversion has seen it tumble further this morning

Confidence in the UK currency remained weak on Friday in the wake of comments made by Mr King and the BoE, with the price sinking below $1.60.

• Having initially fallen to a four month low of 1.5921 in the early hours of Friday morning, the pound proceeded to consolidate above 1.60, with analysts suggesting that a bullish correction was expected in the wake of Thursday’s plunge.
  
• However, bearish sentiment towards the pound soon returned, with traders continuing to dump the British currency on perceptions that the BoE would lag other countries in tightening its loose monetary policies.
  
• In the afternoon, a worse-than-expected reading in U.S. durable goods orders triggered a risk aversion rally, which also helped to send the pound back down near its intra-day low.
  
• Additionally, analysts noted that the pound’s slide led Japanese retail traders to liquidate sterling/yen long positions, adding further selling pressure.
  
• In trading this morning, the pound is down half a cent as a rise in risk aversion is spurred by weaker stock trading in the Asian markets.

Sterling continued to slide vs the euro on the run up to the weekend, but has capped its losses this morning

Sterling fell yet further on Friday on perceptions that the UK currency would be allowed to weaken to help the fragile British economy.

• The pound dropped to a fresh five-month low against the euro on Friday as traders continued to sell sterling following comments from Mervyn King that sterling’s fall was helpful in rebalancing the UK economy.
  
• Some analysts have suggested that these comments which have undermined the UK currency, have become a new policy tool with which the central bank can kick-start the economy.
  
• Pressure on the pound was also stemming from the UK’s budget deficit and continued speculation that the BoE might yet loosen monetary policy further.
  
• In trading this morning, slight profit taking has seen the pound cap its losses, with the pair currently trading around 0.15% up for the day.
  
• Market players say that the outlook for sterling does remain bearish though, and it is set to remain the weakest of the major currencies for some time.

Positive economic data from NZ, keeps the kiwi rallying higher vs sterling

The New Zealand dollar advanced for the third consecutive day yesterday, as demand for kiwi assets remained high and as sterling weakness becomes ever more apparent.

• The kiwi gained another two and half cents (1.1%) yesterday after the BoE announced that it was perfectly content with a lower currency exchange rate and was unlikely to initiate any type of tightening into its monetary policy for the foreseeable future.
  
• The kiwi also continued to be supported by positive economic data from New Zealand, which supported claims that the RBNZ is considering raising interest rates.
  
• The New Zealand currency has found support today after the G20 did not indicate any imminent withdrawal of stimulus measures, triggering a rush back into higher-yielding assets.
  
• Initially the kiwi lost ground following disappointing local trade data released late last night, but it has rebounded strongly, climbing 0.75% in trading so far today.

Aussie hits new highs on sterling weakness and a rise in demand for higher-yielding currencies

Selling pressure on the pound and demand for higher-risk currencies saw the aussie advance to a fresh twenty-year high of 1.8464 against the pound.

• Remarks by Bank of England Governor Mervyn King to a regional newspaper published yesterday underscored the central bank's lack of concern about the weakness of the pound, which sent the currency spiraling.
  
• The aussie received further support as investors shifted funds into higher-risk currencies after the US Fed bolstered expectations that interest rates would remain low for some time.
  
• Risk appetite was also encouraged after the G20 meeting, where a statement showed signs that that global stimulus measures would remain in place, buoying demand for the Australian dollar.
  
• In trading this morning, the pound’s downward trend has continued as confidence in the currency remains weak, with the aussie pushing on another cent with trading currently around 1.8450.

Euro lost ground vs the dollar following an easing in risk appetite

The greenback continued to rally against the single currency yesterday, buoyed by a rise in risk aversion, to close the day at 1.4660.

• The dollar was under pressure yesterday after Wednesday night’s Federal Reserve meeting left investors with the message that US interest rates will remain very low for a long time.
  
• The euro also made gains against the dollar as the German Ifo Business climate survey rose to its highest level in a year in September, though it did undershoot forecasts of a stronger advance.
  
• However, the US dollar turned higher in the afternoon, after a report showed that sales of existing homes in America unexpectedly dropped in August, the first decline in five months.
  
• The euro also erased gains after major central banks, including the Fed, announced they were scaling back some emergency lending facilities.
  
• These gains were added to as US stocks turned negative in the afternoon, which further eased risk appetite in the market.
  
• This morning, the euro has recouped some of its losses after a statement from the G20 encouraged speculators to sell the low-yielding greenback.

Sterling weakness drags it down below 1.60 following King's comments

The pound slid 1.7% against the greenback yesterday as momentum to dump the pound snowballed following comments from King that lent his support to a weak currency.

• Sterling was at a two and a half month low against the dollar after comments from Mervyn King left FX markets in no doubt the Bank of England was comfortable with a weaker pound.
  
• A meeting set up between the BoE and London-based economists to clarify policy also worried investors who maintained their bearish sentiment toward the pound, pushing it lower.
  
• An easing of risk appetite added support to the dollar after data revealed a decline in US existing home sales from the previous month and undershooting forecasts.
  
• Additionally, as the US markets came online, equity markets took a turn into the red, which supported demand for the haven currency, and brought the price to a close of $1.6064.
  
• In trading this morning, sterling has tumbled to a four month low against the dollar as a break of the 1.60 level triggered a wave of stop loss sales.

The pound's decline continues, as confidence in the currency is undermined

Sterling went into its steepest daily decline against the single currency in 5 months yesterday, losing 1.2%, after Mr. King revealed that he was content with the current value of the pound.

• Sterling hit its lowest euro price since early April, extending broad losses after Mervyn King said that a weak pound was supporting a necessary rebalancing of the UK economy.
  
• The euro was also supported by a further rise in business confidence in Germany. Although expectations for the Ifo economic survey were not matched in September’s report, the modest increase reflected optimistic future expectations for economic recovery.
  
• Demand was further eroded as the Daily Telegraph reported yesterday that the Bank of England was set to meet with economists in a "crisis" meeting designed to stem alarm and confusion over the QE program and the weakness of the pound.
  
• Additionally, once the pound broke below the 1.10 level, automatic sell off points were triggered, driving sterling down to a near six month low of 1.0922.
  
• The pound has slid further in trading this morning, losing another 0.5%, and currently trading around 1.0900.