GBP USD Rate Down, GBP AUD Up Ahead Of Fed Announcement

Published: Wednesday, 19 June 2013 09:00 BST - Written by James Fuller

STORY LINK GBP USD Rate Down, GBP AUD Up Ahead Of Fed Announcement

Every so often there comes a watershed moment in the currency markets – the news that Lehman Bros had gone under, America’s AAA sovereign debt downgrade and the Swiss National Bank’s decision to introduce a minimum floor of 1.2000 for EUR CHF spring to mind in recent years. Today’s session has the potential to provide investors with such a landmark event, as the Federal Reserve’s Federal Open Market Committee makes its latest policy announcement in Washington tonight.

Scarcely have an FOMC policy decision, or Chairman Ben Bernanke’s press conference which follows shortly afterwards, been so eagerly anticipated. Bernanke set the stage for tonight’s crucial US risk event when he suggested on 22nd May that a reduction to the Fed’s $85bn per calendar month QE programme might be on the cards as soon as America’s labour market showed signs of making an improvement. With last week’s US Non-Farm Payroll data beating expectations, there would appear to be a live chance that Bernanke will announce later today that QE3 is on the way out. With the global economy showing signs that it is healing and with the Bank of Japan having pointedly failed to extend its own QE programme earlier this month, such an announcement could herald the end of ‘easy money’ and usher in the dawn of a new era in the global markets.

There was significant price action during yesterday’s session as investors chopped and changed their portfolios in an attempt to position themselves correctly for tonight’s key announcement. The Pound to US Dollar exchange rate (currency : GBP USD) lost ground as market participants shifted into the Greenback, suggesting that they believe that there is a live chance that the Fed would be scaling back QE. The Pound to Australian Dollar exchange rate (currency : GBP AUD) gained a limited amount of ground, climbing to as high as 1.6575 for similar reasons.

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