Gains Forecast for Pound Sterling to Dollar Exchange Rate In Spite of Downbeat UK GDP Data

April 28, 2015 - Written by John Cameron

STORY LINK Gains Forecast for Pound Sterling to Dollar Exchange Rate In Spite of Downbeat UK GDP Data

Geo-political events in far flung corners of the world have affected the relative value of several leading global currencies during today’s session. The closely-monitored $VIX ‘Fear Gauge’ jumped to its highest level since the start of last week as a consequence, touching $14.22 during the early part of the North American trading session.

The flight to safety in the markets was partly driven by the news a few minutes ago that the Iranian Navy had seized a US cargo ship. Unconfirmed reports suggest that the American ship was accompanied by the Iranian military vessel to the Iranian port of Bandar Abbas, raising fears of an awkward stand-off between Washington and Tehran. The prospect of such an outcome suppressed global appetite for risk and the mood of gloom in the investment community was accentuated by the news that Finland’s navy had dropped depth charges in the gulf of Helsinki as a warning to a suspected Russian submarine which had been spotted in Finnish territorial waters earlier this week. Russia has been flexing its military might more regularly in recent months in an effort to remind the international community of its military capability.

The shift out of risk threatens the export-driven Commodity Dollars including the Australian Dollar (currency:AUD), New Zealand Dollar (currency:NZD) and the Canadian Dollar (currency:CAD). However, up to this point, the GBP AUD and GBP NZD exchange rates have shed support on the day thanks to a lowly showing from the latest quarterly UK Gross Domestic Product data, published earlier. Analysts had been anticipating a quarterly showing of 0.5% from the keynote data, so the result of 0.3% hit the Pound Sterling hard.

Elsewhere, the Pound did manage to record decent gains against the US Dollar (currency:USD) on the day following a poor print from this month’s US Consumer Confidence survey, published a short time ago. The result of 95.2 versus an anticipated 102.5 triggered a strong bout of selling pressure on the Greenback which sent the GBP USD exchange rate up to a fresh 7-week high of 1.5338. Further gains are forecast for the pair if tomorrow evening’s Federal Reserve policy statement strikes a dovish tone.

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