Pound Dollar Today: GBP/USD Exchange Rate Forecast To Drop Following USD13bn JP Morgan Fine

October 21, 2013 - Written by Minesh Chaudhari

STORY LINK Pound Dollar Today: GBP/USD Exchange Rate Forecast To Drop Following USD13bn JP Morgan Fine

A massive fine for banking behemoth JP Morgan could cause appetite for risk to drain from the market, sending GBP AUD & GBP NZD higher and GBP USD the other way. Meanwhile, the future direction of the Bank of England’s monetary policy remains up in the air.

The Pound US Dollar exchange rate (GBP/USD) is currently trading up by 0.05% at 1.6176 GBP/ USD. The US Dollar Pound exchange rate is currently trading at 0.6182 USD /GBP.

News from the US during the weekend market shutdown that giant investment bank JP Morgan has agreed to pay a record $13bn fine to regulators in the States for its part in the sub prime mortgage scandal which led to the global credit crunch of 2007/08 has the potential to be market moving for several leading global currencies. The US authorities imposed the massive fine because of the central role which the merchant bank played in the dicing, slicing and selling on of mortgage-backed securities which almost brought the world financial system to its knees some five years ago.

The US Dollar has come in for some sustained selling pressure over the past month, but it appears highly possible that the weekend news regarding JP Morgan will have a negative effect on investors’ appetite for risk, triggering increased support for the Greenback during today’s session. Such a move from market participants could send the Pound US Dollar exchange rate (GBP/USD) back down towards the 1.6000 threshold once more.

Meanwhile, any dip in investor sentiment is likely to send the Pound Australian Dollar (GBP/AUD) and Pound New Zealand Dollar (GBP/NAD) exchange rates the other way following their poor performance since the conclusion of the US debt standoff during the middle part of last week.

Elsewhere, the last knockings of last week’s session brought contradictory comments from two Bank of England policymakers regarding the future direction of UK interest rates. The BoE’s Chief Economist Spencer Dale suggested on Friday that it was ‘unlikely’ that Britain’s base rate would be heading higher next year. Another policymaker, Ben Broadbent, had other ideas, stating shortly afterwards that the MPC now has the scope to raise interest rates by a ‘fair amount’ before UK property owners felt the pinch.

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