Sterling made gains against the kiwi yesterday, but rising risk appetite has supported kiwi advances today

Evidence that the UK economic recovery is strengthening enabled sterling to reverse a five day slide against the kiwi, closing up at 2.2341.

• Sterling clawed back nearly two cents, or 0.8%, in the wake of strong data referring to retails sales, credit lending, and a final upward revision to the GDP figure.
  
• Sales volumes at UK retailers bounced back to their strongest level for five months in September, reaching levels well above expectations, whilst the second quarter GDP figure in the UK was revised to just a 0.6% contraction.
  
• The positive data was offset slightly by a weaker-than-expected UK current account deficit, but investors seemingly overlooked this, with demand for the pound broadly rising.
  
• In trading this morning however, the kiwi has advanced, supported by a survey showing business confidence in New Zealand at a ten-year high, which fed speculation of a rise in rates.
  
• The kiwi also benefitted from a sluggish dollar and strength in the aussie, which supported appetite for riskier assets.

Positve UK data enabled the pound to reverse losses against the aussie yesterday

The pound reversed recent losses to gain 0.75% on the aussie yesterday in the wake of some positive economic data, which spurred investor demand.

• A GDP revision showed that British output contracted 0.6% in the second quarter compared with activity in the first three months of 2009, better than the previous estimate of -0.7%, according to the Office for National Statistics
  
• This data was supported by higher realised sales and an increase in net lending to individuals, which, together, underlined hopes that the UK should pull out of recession in the 3 rd quarter.
  
• The positive market reaction enabled the pound to distance itself from long-term lows hit recently against the aussie, though an increasing UK current account deficit may weigh on sterling’s recovery.
  
• In trading this morning, the Australian dollar has rebounded, already up 0.4% on the day, following better-than-expected month on month retail sales, which add to the case for a rise in interest rates as early as November.

An easing of risk appetite weakened the euro yesterday, but it has rallied back over $1.46 so far today

The single currency hit a two-week low against the greenback yesterday as a rise in risk aversion strengthened demand for the haven currency.

• The dollar rose for a second day as evidence that economies have yet to shake off the worst effects of the global recession spurred demand for the safety of the U.S. currency.
  
• Russia’s central bank cut its main interest rate, signaling that things are not as positive as they appeared previously, and spurring demand for the dollar.
  
• The greenback also found support following a disappointing US consumer confidence survey, which cautioned investors in their risk appetite.
  
• Comments from ECB President also weighed on the euro, with Trichet saying that he was in favour of the argument for a strong US dollar in the foreign exchange markets.
  
• The remarks were reflective of a concern regarding the strength of the single currency on the eurozone economic recovery.
  
• This morning, the single currency has stretched back over 1.46 as risk sentiment returns to the market, diminishing demand for the dollar.

More positive investor sentiment returned to the UK yesterday, supporting a slight pound recovery

Sterling reversed a four day slide against the dollar yesterday, supported by positive economic data that included another upward revision of the 2nd quarter GDP figure.

• The final gross domestic product figure showed that UK growth contracted by 0.6% between April and June, a narrower fall than the previous estimate of a 0.7% contraction.
  
• The revision is almost entirely due to stronger estimates of construction output than previously forecast, according to analysts.
  
• Sales volumes at U.K. retailers also bounced back more than expected to their strongest level for five months in September and are expected to remain steady in October.
  
• In the US, a confidence survey produced a figure below the level expected, which cautioned investors slightly, capping sterling’s gains and bringing it down from an intra-day high of $1.5989.
  
• However, the pound has continued to rally this morning, already up another cent and currently trading around 1.6060, following the strongest Gfk consumer confidence survey figure since January 2008.

The UK economy is showing signs of recovery, which has buoyed the ailing pound

In trading yesterday the pound picked itself up from 6-month lows against the single currency, gaining 0.7% as positive data buoyed investor sentiment.

• In a final revision, Britain’s second quarter GDP figure was reported as -0.6%, up from a previous revision of -0.7% and strengthening claims that the UK will exit recession in the third quarter.
  
• There was also positive data from the UK CBI retail sales index, which showed considerable improvement from last month, reaching levels well above expectations.
  
• Additionally, lending to individuals rose in August, reflecting both an increase in the willingness of high street banks to extend credit, and also improved consumer confidence in the market as they begin to take on more debt.
  
• In the evening, it also emerged that the BoE may not be planning to lower interest rates, backtracking from King’s recent comments, and enhancing the pound’s yield appeal.
  
• Sterling fared well following the day’s news, but its gains were capped as it was also revealed that the U.K.'s current account deficit widened in the second quarter to its largest level for nearly two years, as investment income narrowed.

Sterling fell just 0.03% against the kiwi yesterday, but has suffered in trading this morning

The pound slowed its rate of decline against the kiwi yesterday, falling just 0.03% as weak Asian trading dulled risk appetite.

• The pound slipped lower, but stemmed its rate of decline as demand for the higher-yielding currency was curbed following weaker trading on the Asian markets.
  
• Sterling has been broadly sold recently following comments from the King and BoE, however the strong European stocks prevented the pound from sliding too sharply yesterday.
  
• Major European and US stock indices climbed between 1 and 2%, firming up confidence in the global recovery, and lending slight support to the ailing pound.
  
• In trading this morning however, the kiwi has already advanced 0.7% following positive building consents data from New Zealand, which has encouraged investor demand.
  
• Analysts say that with stocks continuing to push higher and central banks not yet ready to unwind stimulus measures, the New Zealand dollar is likely to maintain its upward trend.

Aussie has advanced further vs sterling as talk of interest rate hikes is renewed

Sterling slid for the third consecutive day against the Australian currency yesterday as the pressure of recent events and statements continued to weigh heavily.

• The aussie pushed higher, gaining another 0.9%, as the pound failed to shrug off comments made last week that a weak currency was in keeping with the BoE’s policy.
  
• The aussie dollar was also supported from a rise in commodity prices, particularly gold, which rallied back above $1000 per ounce yesterday.
  
• Additionally, risk sentiment among investors returned as stocks in Europe and the US traded strongly, buoying demand for riskier assets.
  
• In trading this morning the aussie has continued to advance, supported by renewed talk that the Reserve Bank of Australia would start raising rates in November.
  
• The speculation came after a central bank watcher said the RBA was almost certain to hike rates by 25 basis points in both November and December, which would make the Australian currency an even more attractive bet for investors searching for bigger returns.

Dovish words from the ECB president dragged the euro lower against the dollar yesterday

Talk of a slow recovery in the eurozone strengthened demand for the dollar yesterday allowing it to recover 0.5% to 1.4618.

• Support for the single currency was curbed slightly following the words of European Central Bank President Trichet, who spoke yesterday of a slow recovery in the 16-nation region.
  
• The governing council of the ECB considers that it would be premature to declare the crisis over, stating that now was not the time to implement an exit strategy.
  
• Additionally, analysts have said that on the whole, although the euro / dollar price is biased to the upside in the medium term, the single currency is now being challenged by corrective weakness.
  
• The single currency has dipped lower again this morning, currently trading marginally below 1.46, as investors hold off taking positions ahead of important US data this afternoon.
  
• There is a consumer sentiment survey out in the US at 15:00BST, which is forecast to reveal improved confidence in the market, which could weaken demand for the dollar.

Pound fell lower against the dollar yesterday, but found some support to ease its rate of decline

Sterling fell as persistent bearish sentiment pushed it to an intra-day four-month low of $1.5796 against the dollar, before closing at $1.5882.

• The pound managed to pull back slightly from early losses after Chancellor Alistair Darling made a speech in which he reiterated the need to curb “reckless” bonuses.
  
• His comments suggested that the government would be taking forceful steps to firm up the fragile banking system which returned a certain amount of confidence to investors and prevented the pound from falling further.
  
• The pound also benefited from slight profit taking and rising stocks, but analysts said that despite expectations for improving economic data, the sterling / dollar price looks vulnerable to a further downside push with strong resistance materialising around 1.5750.
  
• This morning, sterling is trading marginally lower as investors await important economic data released in the UK and the US today.
  
• CBI realized sales are out in Britain at 11:00BST, whilst in the US, data from a consumer confidence survey at 15:00BST is likely to reveal improved sentiment, which could stem demand for the haven currency.

Pound edged higher against the euro yesterday and has consolidated its position this morning

Having traded in the red for most of the day, the pound rebounded in the afternoon to close the day marginally up at 1.0859.

• ECB President Jean-Claude Trichet in a speech yesterday stated that the European economy will likely recover slowly in the coming months.
  
• Trichet continued, saying that it was too early for the ECB to stop pumping liquidity into the economy or to raise interest rates, which slowed demand for the single currency.
  
• Additionally, data showed that consumer prices in Germany fell faster than expected in September, which was a steeper decline than the market had looked for, capping the euro’s gains .
  
• In the UK, Hometrack Ltd revealed that UK house prices increased by the most in two years during September as confidence in the property market improved, although the news went relatively unnoticed by the market.
  
• Second quarter current account data and a revised GDP figure are out today at 09:30BST with forecasts predicting slightly improved numbers from the first quarter, which could lend support to the pound.