Forex Forecasts: Pound Sterling vs Euro, US Dollar, Aus Dollar Predictions for Weeks Ahead (2014)

October 20, 2014 - Written by John Cameron

STORY LINK Forex Forecasts: Pound Sterling vs Euro, US Dollar, Aus Dollar Predictions for Weeks Ahead (2014)

Our leading foreign exchange analyst walks us through the 2014 near-term exchange rate forecast for the Pound Sterling (GBP) vs the euro (EUR), US Dollar (USD) and the Australian Dollar (AUD) below.

A grave warning from outgoing European Commission President could hold back the POUND STERLING (currency:GBP) this week.

Jose Manuel Barroso observed that a ‘Brexit’ (British exit) from the European Union would leave the UK with ‘zero influence’ on the global stage.

With the Pound still reeling from last week’s lowly domestic inflation data, this could be a testing week for those holding Sterling-denominated assets.

Analysts predict that the Pound Sterling forecast will trade with a NEUTRAL bias in the short term.

Weekend comments from German finance minister Wolfgang Schaeuble have the potential to set the eurozone’s premier economy at loggerheads with the European Central Bank (ECB).

The EURO (EUR) may come out of the situation as the biggest loser.

ECB President Marion Draghi promised to do ‘whatever it takes’ to save the single currency from extinction when he took office.

By definition, this would include ‘all-out’ Quantitative Easing in the form of large scale purchases of sovereign debt.

Schaeuble’s words yesterday suggest that Germany is not willing to support monetary expansion and will instead attempt to pursue a Keynsian approach to re-enlivening its economy.

This frisson at the heart of the European project means that the euro is still forecast to perform on a NEGATIVE footing. The GBP EUR exchange rate stands at 1.2638.

The NEW ZEALAND DOLLAR (currency:NZD) staged a spectacular comeback against the Pound last week, sending the GBP NZD exchange rate down to below the two to one level. Improved wholesale dairy prices at the latest Fonterra auction helped the Kiwi, but its gains against Sterling could prove to be ephemeral if Wednesday night’s local inflation numbers point to a move towards deflation.

The next day’s New Zealand trade numbers will be key in such a situation and policymakers at the Reserve Bank of New Zealand will be hoping that they suggest that the recent weakening of the Kiwi is boosting the nation’s exporters.

In the meantime, the Kiwi is expected to trade on a NEUTRAL TO POSITIVE footing. The GBP NZD exchange rate stands at 2.0328.

The US DOLLAR (currency:USD) recorded significant losses against Sterling during last week’s session, thanks in part to the release of a highly downbeat assessment of the American economy in the latest Federal Reserve Beige Book. Greenback-holders will be desperately hoping that the midweek domestic inflation figures show at above the anticipated year-on-year 1.6% level, kick-starting renewed talk of a rate hike from the Fed.

Elsewhere, the Buck could do with a decent showing from tomorrow’s Existing Home Sales numbers to provide evidence that the domestic property market is still improving.

The outlook for the Dollar is NEUTRAL and the GBP USD stands at 1.6109.

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