Aussie, NZ + Cdn Dollar Forecast - Losses Predicted for Australian, New Zealand & Canadian Dollar Exchange Rates On Fed Rate Speculation

September 15, 2014 - Written by John Cameron

STORY LINK Aussie, NZ + Cdn Dollar Forecast - Losses Predicted for Australian, New Zealand & Canadian Dollar Exchange Rates On Fed Rate Speculation

Currency News UK presents our exchange rate forecasts for the Australian, New Zealand & Canadian Dollar:

The week ahead could prove to be a monumental one in the currency markets. Thursday’s session brings the long-awaited Scottish referendum with a split in the 307-year old United Kingdom a real prospect.

The weekend market close saw British Prime Minister David Cameron warn Scottish voters that there is ‘no way back’ should they vote for independence. The latest opinion polls suggest that a ‘Yes’ vote remains a live possibility; the Panelbase survey of voter intentions, published over the weekend, found that the ‘Better Together’ campaign held the slenderest of leads, with 50.6% of the vote versus 49.4% coming out in favour of an independent Scotland.

Whisky and textiles, shortbread and crude oil – analysts estimate that the economic output of Scotland’s economy was $245.27bn last year. This compares with $2,400bn for the UK economy as a whole, meaning that a vote in favour of Scottish independence on Thursday would reduce the annual GDP of what remained of the UK economy by around 10%. A currency is only as strong as the economy which backs it, so ceteris paribus, analysts conclude that a ‘Yes’ vote to independence would reduce the value of the Pound Sterling by around 10%. Such a move would send the Pound US Dollar exchange rate down to around the 1.4500 GBP/USD level, while the Pound euro exchange rate might slide to as low as 1.1300 GBP/EUR come Friday morning.

Elsewhere, the other major risk event which has the potential to alter the relative level of several major global currencies this week comes on Wednesday evening with the US Federal Reserve’s latest monetary policy announcement. The era of cheap money washing round the global markets appears to be nearing an end and Fed Chair Janet Yellen will confirm during her post-announcement press conference that America’s Quantitative Easing programme will be drawing to a close next month.

However, in a move which may propel the Pound US Dollar exchange rate down through the psychologically-key 1.6000 GBP/USD threshold, many economists also expect Yellen to suggest that US interest rates may be on the move higher sooner than the market currently expects. Michael Hartnett of BoA Merrill Lynch commented yesterday that, ‘the period of zero interest rates is coming to a close. We now think that the Fed will hike next June, (rather than September).’ Such a move would be likely to cause the risk-driven Commodity Dollars to lose ground across the board, sending the GBP AUD, GBP NZD and GBP CAD exchange rates sharply higher once more.

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TAGS: American Dollar Forecasts Australian Dollar Forecasts Canadian Dolla Forecasts