The pound has hit a two-year high against the US dollar on views that high-profile UK schedule will underline Britain’s solid economic recovery.The US dollar’s woes against the pound come as investors worry that all-important US non-farm payrolls data could seal expectations the Federal Reserve is still several months away from stimulus tapering, and will keep on pumping $85 billion-a-month into the US economy. However, the US dollar could snap back from recent selling pressure if surprisingly strong US data puts the possibility of the Federal Reserve starting to reduce stimulus at its meeting later this month, firmly back on the table.The euro has slumped to a fresh 10-month low against sterling amid concerns the European Central Bank will keep the door to more aggressive monetary easing firmly open when it announces its latest policy decision.

Sterling

The British pound has rallied to a two-year high against the US dollar and broken through some tough resistance against the euro to reach a fresh 10-month high ahead of busy economic calendar. The pound’s strength against its main rivals could reach new levels should upcoming updates from the UK, US and eurozone keep the Bank of England’s policy outlook looking slightly more hawkish in comparison.

US dollar

The US dollar slumped to September 2011 lows against the British pound amid concerns that key US labour market data could seal expectations the Federal Reserve is still months away from stimulus tapering. The greenback’s weak start also comes in front of US manufacturing PMI index that is expected to show the industry expanding at a slower pace last month. The US dollar could snap back from recent selling pressure if payrolls data beat forecasts, putting the possibility of the Federal Reserve starting to reduce stimulus at its meeting later this month, firmly back on the table.

Euro

The euro is under pressure despite better-than-forecasted eurozone inflation and unemployment data as markets worry the European Central Bank could push on with more stimulus measures. The ECB will announce its December policy decision amid on-going speculation that President Mario Draghi may do something more aggressive with interest rates, such as dropping deposit rates for banks to a negative number.

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