Testing time ahead for currencies

The main moves on currency markets during 2014 occurred in the second half of the year.

Most notable was the marked strengthening of the dollar as the Fed began to sound more hawkish on interest rate policy while, at the same time, US economic data continued to improve, in particular figures on the labour market.

The Fed has been hinting recently that it may start to hike interest rates around the middle of this year if the economy continues to show good momentum in 2015. Meantime, sterling was supported last year by an impressive pick-up in the British economy, including in the labour market where the jobless rate has declined at a much quicker than expected pace.