What's been driving the currency recently is the fact that money markets have been warming up to a series of rate hikes.
Teis Knuthsen
Sterling is overvalued and the economy is tending lower.
economy
We consider sterling to be overvalued and expect it to weaken against the dollar in tune with rising expectations for a rate cut by the BOE. Until we get further confirmation that BOE will cut, sterling will be volatile.
expectations rising
2005 began with a dollar that was very cheap due to fundamental issues like the current account deficit. Rate differentials then supported the dollar, and we think relative rates will continue to drive currency markets.
drive issues cheap currency
money fact currency series driving
Yesterday we saw the beginning of a correction in a range of commodity prices, particularly gold, and as that happened we saw commodity currencies trading weaker and that gave a lift to the dollar. That theme is still valid.
gold beginning correction yesterday
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