The Swedish krona ended this week gaining versus the European single currency as Greek’s budget deficit is once again affecting the outlook for the euro, which also declined versus most of the main traded currencies in

foreign-exchange markets.

The krona ended this week with a third consecutive day of gains versus the euro after Greece’s deteriorating economic health is raising concern towards traders regarding the Eurozone, after European Central Bank President Jean-Claude Trichet affirmed that member countries will not have any privileges.

EUR/SEK ended the week at 10.17 from 10.22 on Monday when markets opened.

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The pound continued to rally yesterday and is now poised to snap a three-month decline versus the euro, as the UK showed positive economic signals.

• Data from the Bank of England revealed that UK net consumer lending rose less than expected in September but the number of loans approved for house purchases did hit its highest level in 18- months.
• Mortgage approvals rose to 56,215 from a revised 52,970 in August, which is the highest level of approvals since February last year and marks a solid recovery from September 2008 when only 33,419 mortgages were approved.
• The more positive data saw traders trimming excessive short positions in the pound, enabling the UK currency to briefly extend gains over 1.12, and suggesting that the markets may have overreacted to the surprisingly weak GDP data last week.
• Analysts noted that the UK currency also benefited as the euro fought to stem its broad slide this week, as traders saw the slump in global equities earlier in the week as a sign to sell the single currency.

The pound continued to advance against a broadly weaker single currency yesterday, hitting a six-week high of 1.1167 as investors trimmed their euro holdings.

• Preliminary CPI data from Germany revealed that consumer prices remained flat on the year in October. Monthly data showed that the index did rise by 0.1% in October from September, though this rise failed to garner support for the euro.
• The markets also saw a slight withdrawal of risk activity yesterday as weak housing data in the US renewed concern over the health of the global recovery.
• The data dragged European equities down to three-week lows, which appeared to impact more severely on the single-currency, enabling the pound to gain.
• This morning, the pound is consolidating its position above 1.1100, with analysts reiterating that sterling is likely to remain in a holding pattern until next week’s BoE asset purchase decision.
• Investors are cautious amid uncertainty over whether the Central Bank will extend their quantitative easing programme, and so sterling movements may continue to be dictated by risk appetite in over the coming days.

After an unsteady early session, the pound rebounded strongly from Friday’s sell off, to close 1.1% up.

• The pound recovered steadily through the day after data revealed that the German Gfk consumer sentiment indicator dropped to 4.0 from 4.2 in October, weaker than the median forecast of 4.5, dulling demand for the single currency.
• In addition UK business confidence rose to the highest in 18 months, according to a third-quarter survey, with 19% of executives polled saying the outlook for business is “good” or “very good,” up from 9% in the previous quarter, which stoked demand for the pound.
• Analysts hypothesised that the pound may be considerably oversold at its current value, which does present a good opportunity for British businesses.
• Analysts also noted two opposing arguments developing: the first is a widely held view that based on better PMI survey data there is a good chance that GDP data for Q3 will be revised up.
• The second is the growing certainty that the BoE will announce a step up in QE at next Thursday’s policy meeting. The offsetting nature of these views may contain volatility in the approach to the November 5 th policy meeting.

In trading on Friday, the pound slipped back from two-week highs around the 1.8000 level against the aussie as a weak GDP figure dulled demand for the UK currency.

• A report showed that the UK failed to exit the recession in the third quarter of this year, giving the central bank more reason to keep enacting emergency measures to spur growth.
• The data showed that the UK contracted by a further 0.4%, disappointing expectations of a 0.2% expansion and firmly halting the pound’s progress.
• Where as in Australia interest rates have already been raised on the back of growing confidence in the economy, the UK may now be considering further loosening its monetary policies as recovery struggles to take hold.
• In trading this morning, the pound continues to fall, currently down 0.4% after the aussie received a boost from a Chinese report that suggested authorities were looking to diversify the country’s foreign exchange reserves.
• The report suggested that China may look to buy up euro’s and yen, which analysts said could also spill over into the aussie providing further demand.

The single currency slipped back from multi-month highs against the dollar following positive US housing data, with the pair closing the week at 1.5006.

• The US dollar found support after a report showed that US existing-home sales improved more than expected last month.
• Resales of US houses jumped 9.4% in September to a seasonally adjusted annual rate of 5.57 million, the highest rate in more than two years, which stemmed the recent broad dollar sell off.
• Analysts stated that the recent bout of euro strength could now be looking over-stretched, given huge accumulation of short positions on the dollar.
• In addition, the single currency came under pressure at the end of last week after Henri Guaino, right-hand man of President Nicolas Sarkozy said that, “the euro at $1.50 is a disaster for the European economy and industry,” reaffirming the recent sentiment of the ECB.
• However, the dollar has fallen to a fresh 14-month low against the euro in trading this morning after a Chinese central bank researcher called for moving some of the country’s massive foreign reserves into euro and yen holdings, weakening demand for the US currency.

In an uncertain day for the UK economy, the pound lost as much as 2.0% to the euro on Friday, sharply reversing its recent rally to close down at 1.0862.

• Data revealed that the UK economy unexpectedly contracted by 0.4% between July and September this year, confirming that the UK is still in recession.
• Quarterly growth of 0.2% had been expected, although expectations had been tempered by recent figures showing no growth in retail sales in September and a 2.5% decline in industrial output in August.
• Importantly, the disappointing GDP figures may now lead the Bank of England to consider the possibility of extending their asset purchase scheme in their November meeting in order to sustain the evidently fragile recovery.
• Recent comments from policymakers had led markets to believe that the UK would be tightening monetary policies, however the tone is likely to be quite different following Friday’s GDP figure.
• In trading this morning, the pound remains under pressure with investors continuing to sell the UK currency following last week’s disappointing data.

Sterling reached a one-month high against the single currency, rallying strongly as the BoE’s latest policy meeting made no mention of further QE.

• The MPC minutes gave substantial support to the pound, which advanced 1.1% to reach a high of 1.1112, after they sounded a more positive tone than recent statements from policymakers suggested.
• It was revealed that the nine member committee had voted unanimously to leave the size of its asset purchase scheme unchanged at £175 billion, as had been widely expected, and made no direct reference to extending QE in the future.
• This perhaps suggests that the more positive macro news flow and the strength in asset prices may be moving the committee towards favouring a pause in quantitative easing at their November meeting.
• Later in the day, the pound capped its gains, consolidating below 1.11, with investors now awaiting retail data released today at 09:30BST.
• In addition, analysts noted that the eagerly awaited GDP figure on Friday could call a sharp halt to sterling’s recent rally should it fail to meet expectations of a 0.1% growth rate.

Sterling dipped slightly against the single currency, relinquishing gains in the afternoon as US equities slipped back, closing the day down just 0.1% at 1.0958.

• In early trading, investors picked up on comments from the ECB President who added to remarks from other eurozone officials expressing worries about the strength of the single currency.
• In response the markets took the euro slightly lower, enabling the pound to reach up over 1.10, near Monday’s 3-week high.
• In addition, the pound gained slight support after the UK public spending deficit in September fell short of market expectations, buoying investor sentiment.
• However, the euro trimmed its losses in the afternoon as global equities turned negative and investors cautioned over taking long positions ahead of a speech by Bank of England Governor Mervyn King in the evening.
• In trading today, the pound has broadly strenghtned as the MPC minutes from their latest meeting sounded a relatively positive tone. Currently the UK currency is trading one percent up on the single currency, approaching €1.11.

The single currency resumed its climb against the dollar in trading yesterday, supported by rising confidence in the global recovery, closing the day up 0.4%.

• The euro hovered just below the psychologically important 1.50 level as the US dollar remained under selling pressure on expectations that US interest rates will remain pinned at record lows well into 2010.
• The single currency also found support as some investors speculated finance ministers from the 16-nation region meeting in Luxembourg would focus on the currency’s strength.
• The dollar came under further pressure as the continued confidence over the prospects of a global economic recovery were reaffirmed as the Dow Jones opened up over 10,000, keeping haven demand for the dollar in check.
• Late in the afternoon, the Fed added to the greenback’s woes after stating that it has been testing its reverse repurchase agreement tool but is not about to use it, suggesting that US monetary policy is not set to tighten just yet.

Sterling suffered early losses against the euro yesterday after a BoE member hinted that the QE programme should be extended, but the pound recovered to close the day on level footing.

• Adam Posen stated that the central bank should continue its quantitative easing programme as the financial system has yet to show signs of a sustained recovery.
• He added that he was unconcerned about the possibility of further monetary stimulus risking a rise in inflation.
• His comments appeared to eclipse positive house price data from property website Rightmove, which showed that asking prices for homes in England and Wales were up on an annual basis for the first time in more than a year in October.
• Posen’s dovish remarks contrast with those of fellow MPC member, Paul Fisher, who last week suggested that the BoE may be considering drawing its QE programme to a close.
• However, the UK currency rallied strongly in the afternoon, buoyed by surging equity markets, which took their lead from positive US corporate earnings.

Sterling’s rally against the euro persisted on Friday, albeit with slightly less momentum, with the price closing the week at 1.0971, up 0.8% on the day.

• Sterling’s volatile run continued with a modest climb at the end of last week, as investors squeezed what more they could out of a rally that is expected to fade.
• Comments from BoE member Paul Fisher breathed some life into the pound, which has come under heavy pressure in recent weeks, when he stated that the quantitative easing programme is having its desired effect.
• His remarks built on those of Charles Bean earlier in the week and were seen as a departure from the Bank’s hitherto-drab assessments of the UK recovery and relaxed opinion of sterling’s decline.
• Investors reacted positively to the words, feeling that they may have been too quick to price in a further extension of QE into the market.
• In trading this morning however, sterling has slipped back, currently hovering just above 1.09, as investors resume selling the UK currency after another BoE member this time spoke of the need to continue the asset purchase programme.

Sterling strengthened as much as 2.2% to a ten-day high of 1.0936 against the euro yesterday, its biggest intra-day gain since Jan 30th.

• Sterling was able to post strong gains following bullish comments from a Bank of England policymaker who stated that quantitative easing is in fact working.
• MPC member Paul Fisher told the Financial Times he felt confident that the bank’s asset purchase programme was ‘having the scale and speed of impact that we would have hoped for when we started,’ back in March.
• Analysts said that the comments were perceived as lessening the chances that the central bank would expand its loose monetary policy at their next meeting in November, which to some extent, had already been priced into the market.
• His comments echoed those made by fellow MPC member, and deputy Bank governor, Charles Bean, who said on Tuesday that as the recovery proceeds, the Bank would need gradually to remove the large monetary stimulus or risk overshooting its 2 per cent inflation target.
• Sentiment towards the pound has remained buoyant in trading this morning, with the pound currently consolidating its positions above 1.09.

The euro relinquished some of its recent gains against the greenback yesterday, with investors on the defensive ahead of the ECB rate decision today.

• A broadly stronger dollar was the currency of choice yesterday as investors trimmed “riskier” positions in favour of the haven currency as equities slipped into the red, easing risk appetite.
• The dollar also benefited after a US official said raising interest rates would not derail the US economic recovery. “Even if we were to start immediately, much time would pass before incremental increases could be considered tight or even neutral policy.
• Additionally analysts noted that the greenback was being supported by speculation that the dollar’s decline may have been too fast to sustain.
• In trading this morning, the greenback has come under pressure after Australian employment data reinforced demand for higher-yielding assets.
• The ECB are widely expected to announce today at 12:45BST that interest rates in the eurozone will remain at a record low of 1.0%, though the tone of the accompanying statement is likely to reflect growing optimism over the state of economic recovery in the region.

The pound slid for the third consecutive day against the single currency, losing 0.6% following a fall in industrial output, to close at 1.0812.

• Sterling received an early boost yesterday morning as a Halifax survey revealed a further rise in UK house prices of 1.6% in September, buoying hopes of a strengthening economy.
• However, such hopes were soon dashed after data revealed an unexpected fall in UK manufacturing output, which raised doubts over recovery prospects.
• British manufacturing fell 1.9% on the month in August, its steepest fall since January, which compares to a downwardly revised rise of 0.7% in July, and fell some way short of analysts’ predictions of a 0.4% increase.
• Importantly the data has also raised concerns that the UK may not have shown positive growth figures in the third quarter. The British economy is predicted to have exited recession, though yesterday’s figures could have dampened these expectations.
• Investors have continued to sell the pound in trading this morning, with downward pressure likely to remain strong ahead of tomorrow’s rate statement.

The pound was unable to capitalise on improved services data, eventually losing over half a cent to a broadly stronger euro.

• The pound initially found some respite as positive data from the services sector bolstered expectations that the economy resumed growth in the third quarter.
• The purchasing managers’ index for the services sector showed a rise to 55.3 in September, showing improvement from last month and exceeding market expectations.
• However, sterling quickly relinquished its gains over expectations that the MPC meeting later this week will reaffirm that the UK monetary policy will remain comparatively loose for some time.
• Rallying global equity markets also benefitted euro strength, with the corresponding rise in risk appetite failing to buoy demand for the fragile UK currency.
• Pressure is likely to remain high on the pound today if data released at 09:30BST follows market expectations, and shows a month-on-month fall in UK manufacturing production.

Sterling climbed half a cent against the single currency yesterday, helped by a weaker euro, which was undermined by comments from an EU official.

• In early trading, the pound was able to brush off an unexpected fall in the UK Manufacturing industry, which contracted to 49.5 in September, from 49.7 in August, against the market expectations of an increase to 50.3.
• The pound then gained against a broadly weakened single currency as European officials expressed discomfort over the euro’s recent rise in value.
• A top European official announced that he would discuss the EU’s concern over the recent appreciation of the euro at the G7 meeting this weekend.
• The single currency was further undermined as data revealed a rise in eurozone unemployment to a ten year high of 9.6%, which raised concerns over the health of the economic recovery in the region.
• A Nationwide housing survey has revealed that UK house prices rose by 0.9% in September compared with August, the fifth consecutive monthly increase, but the data has gone relatively unnoticed with pound currently down in morning trading.