Sterling Slips as Markets Refocus on Monetary Policy

The main story this week has been the US Dollar. A lack of significant tradable economic data out of the UK and EU has seen Sterling and Euro languish. Sterling in particular has been under pressure as the post-election glow in the unit fades. GBPUSD has declined every day this week and has now almost slipped back to pre-election levels as FX markets refocus on monetary policy.

Based on official forecasts, the Bank of England (BoE) is not expected to hike rates until 2016, meanwhile the Federal Reserve (Fed) is on track to hike rate in the back end of 2015. The prospect of relatively higher investment returns in the United States stimulates demand for the Greenback at the expense of Sterling and biases GPBUSD to the downside.

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