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Sterling under pressure with Friday's risk event looming

Traders start placing bets on central bank meetings later this month..
The Pound has fallen nearly 0.5% in the last 24-hours, as analysts try to predict the outcome to interest rate decisions in 2-weeks' time. The divergence in ECB/Fed v BoE has been weighing on Sterling for well over 6-months now. The majority of economists believe the still dovish BoE is struggling to cope with the significant and persistent inflation in the UK compared to other major nations.

Inflation is 'sticky' everywhere and the road is a long and treacherous one to navigate, whether you are in the dovish or hawkish camp. However, there have been easily more hawkish remarks from the ECB & Fed compared to the BoE since the journey began and this has hampered the Pound the whole way. 

An end to interest rate hiking will be welcomed by most households and businesses, but from a currency perspective, this will signal weakness. This is why stopping the cycle needs to be timed right for the economy as a whole. The Fed have managed to tame inflation better than most and look to tread more carefully in their rate path.

The ECB are dead set in being as hawkish as possible and for as long as possible, but don't forget they started much later than most and from further away (negative territory). The BoE has provided mixed signals and no lane to work with which creates market uncertainty. A 25bp rate hike is the minimum expected this month.