Exchange Rates Forecast: Pound Sterling to US Dollar (USD), Rand (ZAR) & New Zealand Dollar (NZD)

January 29, 2014 - Written by John Cameron

STORY LINK Exchange Rates Forecast: Pound Sterling to US Dollar (USD), Rand (ZAR) & New Zealand Dollar (NZD)

Today’s session is almost certain to bring significant market movement for most of the world’s leading currencies, with investors feverishly adjusting their positions either side of tonight’s Federal Reserve FOMC policy decision in the US. The Fed currently pumps $75bn per month into its controversial Quantitative Easing programme. The US central bank was previously pumping a monthly $85bninto its bond purchase programme but American policymakers opted to trim a hefty $10bn from this commitment just before Christmas. Analysts are anticipating a cut of a similar magnitude tonight.

Pound Rand Exchange Rate Forecast Through 19 GBP/ZAR

If the Fed does decide to cut QE, then it all becomes a case of the scale of the cut. A decrease to the US central bank’s monthly QE payments to below the $65bn level would certainly hit emerging market currencies and risk-sensitive tenders hard. In such an event, expect the SOUTH AFRICAN RAND (currency:ZAR) to be one of the hardest-hit units. In combination with a renewed flare-up of labour market tensions in South Africa, any such news from the States could readily send Pound Rand exchange rate up through the 19.00 GBP/ZAR threshold for the first time in decades.

Pound New Zealand Dollar Exchange Rate Forecast New Run at 18 Month High of 2.0313 GBP/NZD

Similarly, a sharp cut to QE would deliver a body-blow to the Commodity Dollars – collectively the AUSTRALIAN (currency:AUD), NEW ZEALAND (currency:NZD) and CANADIAN DOLLARS (currency:CAD). The New Zealand unit would appear to be particularly at risk given that the latest Reserve Bank of New Zealand policy decision follows just an hour after the Fed announcement. The consensus of opinion amongst economists is that the RBNZ will leave its key lending rate at 2.5%; however a minority of investors are likely to be factoring-in a chance of a rate hike. If New Zealand’s central bank does sit on its hands and the Fed announces a hefty cut to its asset purchases, then look for Pound New Zealand Dollar exchange rate to make a renewed run at last December’s 18-month-year high of 2.0313 GBP/NZD.

Pound Dollar Exchange Rate Forecast Down Near 1.6 GBP/USD

Clearly, any sizable trimming of QE in the States will cause the US DOLLAR to hoover up support, sending the Pound Dollar exchange rate down towards the 1.6000 GBP/USD level in short order.

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TAGS: American Dollar Forecasts Australian Dollar Forecasts Canadian Dolla Forecasts