Exchange Rate Forecast - Canadian Dollar (CAD), Pound to Dollar (GBP/USD) + Sterling to Euro (GBP/EUR)

July 16, 2014 - Written by John Cameron

STORY LINK Exchange Rate Forecast - Canadian Dollar (CAD), Pound to Dollar (GBP/USD) + Sterling to Euro (GBP/EUR)

Exchange Rate Forecast - Canadian Dollar (CAD), Pound to Dollar (GBP/USD) + Sterling to Euro (GBP/EUR) - Although the Pound to Dollar exchange rate (GBP/USD) climbed by around a cent yesterday, the Greenback was one of the best-performing of the sixteen most actively traded global currencies on the day.

The support for the Buck was driven by comments from Federal Reserve Chair Janet Yellen during her appearance before the US Senate Banking Committee.

The Fed Chief delivered a resolutely downbeat assessment of the state of the vast American economy, observing that the domestic jobs market in the US still had ‘significant slack’ to pick up on.

Investors inferred from this that an interest rate hike from the US central bank remains a relatively distant prospect – a development which would ordinarily hurt the Greenback. However, Yellen’s commentary was so negative in tone that it engendered a pronounced ‘risk-off’ environment in the global markets on the day and the Buck hoovered up support as a consequence.

Andrew Wilkinson of Interactive Brokers observed that Yellen, ‘seems to be tempering expectations somewhat and we very quickly turned to risk-off, which seems to be suiting the Dollar.’

In the near-term, this appears to be true, however when the dust settles on Yellen’s testimony tomorrow, and global risk sentiment stabilises, market participants may concentrate on the likelihood that the Fed will be holding their rates at their current ultra-low levels until well into 2015 and possibly into the early part of 2016.

Pound to Dollar Exchange Rate Forecast

For these reasons, we see the Pound to Dollar exchange rate heading Northwards as the week progresses, with the 1.7300 threshold providing a near-term target for the pair.

Highlights for today’s session include this afternoon’s Bank of Canada (BoC) policy decision and May’s UK labour market figures.

Analysts are almost certain that the BoC will be maintaining its key lending rate at its current level of 1.00% for another month; however the tone of policymakers’ rhetoric will be closely-monitored for any hint on the future direction of Canada’s interest rates. Investors remain undecided on which was the BoC will move next, leaving the Canadian Dollar in danger of incurring further near-term losses.

Meanwhile, following yesterday’s higher than anticipated UK inflation numbers, the Pound would appear ripe for a move in the other direction. If the overall joblessness figures show another hefty drop in the overall level of unemployment later today, then look for Sterling to push ahead against almost all of the other sixteen most actively traded global currencies today.

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