Exchange Rate Forecasts: Pound, Euro, Dollar, Australian Dollar, CAD & NZ Dollars & SA Rand May 2014

May 2, 2014 - Written by John Cameron

STORY LINK Exchange Rate Forecasts: Pound, Euro, Dollar, Australian Dollar, CAD & NZ Dollars & SA Rand May 2014

A disappointing Markit/CIPS Purchasing Managers Index survey of the UK’s construction sector, published earlier today, ensured that the POUND STERLING put in a lacklustre performance as the week drew to a close. Warnings from Sir Jon Cunliffe, the Deputy Governor of the Bank of England, that the British housing market could be heading towards a crash, are likely to suppress the UK tender moving forward. The outlook for the Pound is now NEUTRAL TO NEGATIVE.

The EURO has weakened slightly against Sterling today, sending the GBP EUR exchange rate up to 1.2192. A marginally better than anticipated set of whole of eurozone overall unemployment figures were insufficient to buoy the single currency, as investors concentrated on a tame set of German manufacturing data. While talk of Quantitative Easing from the ECB persists, the euro is forecast to trade with a NEUTRAL TO NEGATIVE bias.

The US DOLLAR has been held back so far this week due to Wednesday’s shockingly poor Q1 domestic GDP figures. A possible stalling of the US economic recovery would prolong the Federal Reserve’s QE programme and increase US unemployment. The Buck is now forecast to trade on a NEUTRAL TO NEGATIVE footing in the near-term and the GBP USD exchange rate stands at 1.6866.

The AUSTRALIAN DOLLAR has continued to edge lower against Sterling in recent sessions as market participants factor-in a decreased chance that the Reserve Bank of Australia will be increasing interest rates this side of Christmas following last week’s low domestic inflation numbers. Concerns about the potential effect which the Ukraine situation may have on the global recovery are likely to continue to anchor the Aussie which is forecast to trade with a NEUTRAL TO NEGATIVE bias moving forward. The GBP AUD exchange rate stands at 1.8224.

The CANADIAN DOLLAR has endured a torrid week, suffering a double whammy of weak US growth data and the Federal Reserve announcement that it is cutting its QE programme by a further $10bn. With geo-political risk events threatening the Loonie, the outlook remains bleak. The Canadian unit is forecast to trade on a NEUTRAL TO NEGATIVE footing in the short term and the GBP CAD exchange rate stands at 1.8481.

The SOUTH AFRICAN RAND remains under the cosh against the Pound due to ongoing domestic labour market difficulties and concerns that the tinderbox situation in Ukraine may explode at a moment’s notice. Most economists feel that, in spite of the South African Reserve Bank’s interest rate rises earlier this year, the Rand may weaken further against Sterling in the short term. The GBP ZAR exchange rate stands at 17.7310.

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