Sterling is trading strongly against the kiwi, boosted by positive economic data in the UK

Sterling edged higher against the kiwi in trading yesterday, supported by solid data from the services sector to close the day up at 2.2834.

• The pound made marginal gains after a survey of purchasing managers indicated the UK's dominant services sector saw activity rise at its fastest pace in more than two years.
  
• The data, which exceeded market expectations, followed on from positive manufacturing data earlier in the week and reaffirmed hopes that the UK economic recovery is not stalling.
  
• In trading this morning, the pound has backed off slightly in anticipation of the BoE's interest rate decision, which analysts are suggesting is likely to cause volatility if the members disagree over the level of quantitative easing that is necessary.
  
• In addition, the New Zealand currency has benefited from the US interest rate statement last night, which confirmed that US rates would be low for some time, encouraging investors to continue using the carry trade to invest in higher-yield currencies.
  
• Currently the pound is climbing higher, hovering just below 2.2300 against the kiwi, as positive manufacturing data boosts demand for the UK currency.

Aussie edged higher against the pound, supported by a rise in commodity prices

Trading between this pair was relatively subdued yesterday with the aussie dollar creeping ahead by the close of play, helped by a jump in the price of gold.

• Support for the aussie remained dulled as investors continued to be discouraged following weaker than expected retail sales data.
  
• Although sales were improved from September, the data still revealed a month on month decline in overall sales value, some way below the anticipated 0.5% increase.
  
• However, the Australian currency did find support from solid equity and commodity prices, with gold in particular rising to just shy of $1100 per ounce after India's central bank bought 200 metric tons of the precious metal from the International Monetary Fund.
  
• Analysts noted that risk on is still the general theme running through foreign exchange markets, which is buoying the aussie, however moves are relatively small ahead of two days filled with data and event risk.
  
• The pound is trading slightly higher this morning in the wake of slightly lower gold and stock prices, although the continued prospect of a higher-yield in the aussie is maintaining its strength.

Euro rallied against the US dollar as the Fed confirmed their stance on a loose monetary policy

The single currency rallied from recent lows against the dollar gaining 0.9% as the stock markets firmed and investors got reassurance of low rates from the US Fed.

• European equity markets reversed their recent downward trend yesterday lending support to the euro as the market sold dollars in favour of riskier assets.
  
• Weaker-than-expected predicted unemployment figures went relatively unnoticed in the markets, but the dollar did extend losses following data from the US ISM services sector, which expanded for the second consecutive month, eroding the greenback's safe haven appeal.
  
• In the evening session, the euro jumped to a fresh intra-day high of 1.4905 as the Federal Reserve confirmed market expectations in making no change to their current stance on interest rate policy, calming any fears.
  
• In trading today, the European Central Bank hold their policy meeting, where analysts are keeping a close eye on any mention of exit strategies.

Dollar was weaker in trading yesterday, as strong equities boosted risk appetite

The pound climbed near a cent and a half, or 0.8%, against the US dollar, buoyed by positive UK services data and the Fed's confirmation to keep rates low.

• Sterling found support against a weaker dollar after a UK index of service industries, like its manufacturing equivalent released on Monday, rose in October to the highest level since the onset of the credit squeeze in August 2007.
  
• The October figure came in at 56.9 versus 55.3 in September and a consensus forecast of 55.5. New orders also improved, suggesting that economic growth was gaining momentum.
  
• The pound was able to extend gains in the evening after the Federal Reserve left rates unchanged and reaffirmed its commitment to keep borrowing cost low for "an extended period."
  
• The decision calmed fears among investors that the Fed may signal a tightening of policy following a positive GDP figure, and led to broad selling of the dollar.
  
• In trading today, investors await the BoE announcement on quantitative easing. Some analysts note the outcome may see a split vote, with some of the more hawkish members voting for no extension, which may heighten sterling volatility.

Sterling found support from strong services PMI data yestreday, but lost ground to the euro in the later session

Having posted solid gains throughout the morning and afternoon sessions, briefly reaching over 1.12, the pound slipped back, enabling the euro to close marginally up on the day.

• Sterling initially rose after data showed a higher-than-expected increase in UK service sector activity and as a rebound in equity markets eased risk aversion.
  
• The services PMI index rose to 56.9 in September, its highest level since August 2007, beating market expectations of a rise to 55.4, and the sixth successive month above the 50-level, which represents industry expansion.
  
• However, the euro recovered its losses in the wake of a strong rally against the US dollar, which came under heavy selling pressure following the Fed's rate statement.
  
• In trading today, investors are eagerly awaiting the announcement from the BoE, with market consensus being that they will top-up the quantitative easing programme by at least £25 billion after the economy unexpectedly contracted between July and September.
  
• However, recent positive manufacturing and services data is likely to harden the attitude of those members of the MPC who are opposed to an extension.
  
• The ECB rate decision is also due today, at 12:45. Markets are widely expecting rates to be held at 1.00%.

Positive US data supported a late rally in the kiwi yesterday after it fell sharply on falling equities

The kiwi dollar erased early losses yesterday as positive further positive data in the US attracted investors to the higher-risk currency.

• In early trading the pound gained steadily, benefiting from a hefty loss in global shares, which encouraged investors to trim their exposure to risk.
  
• Investors retreated from risk assets as European share prices fell 2% in the wake of renewed concerns over the banking sector.
  
• In the afternoon session though, data revealed that US Factory orders increased 0.9% in September, following an unrevised 0.8 decline in August, the fifth increase in the last six months.
  
• The data added to a string of positive economic figures that have come out of the US recently and boosted confidence over the strength of the global recovery, lending support to the New Zealand currency.
  
• In trading this morning, the kiwi is trading marginally higher with the price currently hovering just below 2.28.

Apprehensive words from the RBA kept the aussie on the back foot in trading yesterday

The pound climbed back over 1.82 against the aussie after a statement from the RBA dulled the possibility of a rate rise in December.

• In their rate statement early Tuesday morning, the Reserve Bank of Australia, though they did raise the base rate to 3.50%, sounded a more dovish tone than many expected.
  
• In response investors pared back expectations of a further rate rise next month after Glenn Stevens, RBA governor, said higher rates would come "gradually" and that the rise in the Australian dollar, which has gained 27% against the dollar so far this year, might hurt exports and economic growth.
  
• In addition, the announcement of the UK banking shake-up added to the negative sentiment towards the pound, underscoring the potential problems ahead for the economy and its troubled financial sector.
  
• In trading this morning, the pound is marginally down although an unexpected fall in Australia's September retail sales has added to doubts about a further near-term rate rise, slowing the aussie's gains.

The dollar pushed higher against the euro as weaker stocks raised risk aversion in the market

The dollar rose to a one-month high against the euro yesterday as a sell-off in global equities drove haven demand for the US currency.

• The dollar climbed strongly as stocks fell on evidence that banks are struggling to shake off the effects of the financial crisis, damping higher-yield demand.
  
• The single currency declined sharply from a session high of 1.4810 on Asian trade moving to a fresh one -month low at 1.4645, as stock markets plunged following weak results from UBS and news that RBS and Lloyds will undergo a severe shake up.
  
• The single currency came under further pressure in the wake of a rather gloomy economic outlook from the European Commission.
  
• The organisation stated that the EU economy will recover gradually over the next two years as unemployment and government budget deficits continue to climb. The commission expects the bloc's economy to contract by 4.1% this year before expanding 0.7% next year.
  
• The report continued, stating that EU unemployment will likely reach 10.9% in 2010 and warned about a "highly uncertain" economic outlook in the region, which weighed on euro strength.

Having made broad gains, the dollar slipped back on more positive US data

Sterling pulled back over a cent and a half from a two-week low of $1.6264 hit against the dollar yesterday morning, to close the day marginally up at $1.6427.

• Initially, the pound fell sharply after the UK Treasury announced a shake-up of British banks and as investors braced for a possible extension of asset purchases by the Bank of England this week.
  
• Britain's two largest retail lenders, the part-nationalised Royal Bank of Scotland and Lloyds Banking Group will between them sell off businesses equating to 10% of the UK retail banking market to appease EU competition concerns.
  
• The shake-up highlighted the fragility of the financial sector, which is a key part of the UK economy, and added to concerns about the country's public finances.
  
• However, the pound staged a slight rally in the later session as data revealed that US factory orders increased by 0.9% in September, the fifth increase in the last six months, which supported rising optimism for the US economic recovery.
  
• Analysts also suspect that traders decided to sell out of the dollar rally in the later session with investors now eyeing the Federal Reserve's interest rate statement at 19:00 this evening.

The pound is trading well against a weak single currency undermined by EU reports

Sterling posted solid gains against a broadly weaker single currency yesterday, rallying to a close of 1.1155 as the EU commission voiced concern over the eurozone economy.

• The pound erased Monday's losses against the euro as demand for the single currency waned in the wake of an EU report that spoke of a "highly uncertain" recovery in the eurozone.
  
• Fears over the banking sector within the 16-nation bloc also brought the single currency under pressure, with the EU Commission estimating huge potential bank losses in 2010.
  
• In addition, European stocks fell sharply in the wake of news that UBS, the Swiss bank, reported a greater than expected loss. In the UK, RBS announced it was taking more public funding and Lloyds Banking Group announced a rights issue.
  
• In the afternoon, data revealed that UK house prices rose by another 1.2% in October, according to the Halifax, which is the fourth monthly increase in a row .
  
• Nationally, house prices have risen by 2.9% since the end of 2008 and they are now 7.1% higher than six months ago when prices reached a trough in April, which buoyed demand for the UK currency.