Sterling is facing an onslaught of selling pressure even before the Bank of England announces its monetary policy decision as investors start preparing early for a more radical approach to UK monetary policy in the coming months. The pound had already repeatedly set new two-and-a-half-year lows against the US dollar in the run-up to BoE policy decision for March, in which Governor Mervyn King could restart the bank’s printing press in a bid to halt the British economy’s slide towards another recession. The euro has recovered ground but also faced pressure ahead of the European Central Bank’s monetary policy decision and press conference. The ECB will outline its latest growth and inflation projections and the euro’s dip to new two-and-a-half-month lows against the US dollar indicates growing concerns about the direction in which the eurozone economy is heading.

Sterling

Sterling is under widespread pressure again and has recorded another fresh two-and-a-half-year low against the US dollar on speculation the UK Chancellor will expose a new monetary policy blueprint in his budget later this month, which could see the Bank of England move closer to the way the US Federal Reserve is approaching economic growth.

US dollar

Stronger-than-expected US employment data ensured the US dollar rose broadly to reach new six-month highs against a currency basket ahead of uncertain central bank meetings in Europe, which could further inflate the currency’s attractiveness as a safe bet. Traders took comfort from ADP employment figure showing the US private sector increased jobs by almost 200,000 in February. The increase surprised most analysts, who had pencilled in a drop to 170,000 from the previous month’s figure, and bodes well for the economy before vital US non-farm and overall unemployment data.

Euro

Pre-European Central Bank meeting nerves forced investors to reduce long euro positions, pushing the single currency to fresh two-and-a-half-month lows against the US dollar on concerns the ECB is considering more monetary stimulus amid falling inflation and a faltering economic recovery outside of Germany. Bank President Mario Draghi is not expected to announce a cut in interest rates but will outline the ECB’s latest growth and inflation projections, both of which analysts suspect will point markets towards looser monetary policy in the months ahead.