Exchange Rate Forecasts: Pound to Euro, Australian Dollar and US Dollar Improves on UK General Election Result

May 10, 2015 - Written by John Cameron

STORY LINK Exchange Rate Forecasts: Pound to Euro, Australian Dollar and US Dollar Improves on UK General Election Result

The POUND STERLING (currency:GBP) enjoyed a burst of support as soon as the UK General Election exit polls pointed to a decisive result. The outcome, which heralds a new Conservative majority government, came as a massive relief to investors holding the Pound. However, the gains for the UK unit may be pared by the fact that the UK will now face an EU In / Out Referendum. The prospect of a British exit from Europe could anchor Sterling for months to come, so the Pound forecast is NEUTRAL TO NEGATIVE.

The EURO (currency:EUR) has given up a little ground against the US Dollar during tFriday’s session. Nagging fears regarding Greece’s solvency and the continued weakening effect of the European Central Bank’s Quantitative Easing programme have held back the shared currency, but on the positive side, this morning’s better than anticipated German trade data has helped the euro. Most analysts feel that the news from Greece could deteriorate as we head towards mid-Summer, so the single currency is forecast to trade on a NEGATIVE footing moving forward. The GBP EUR exchange rate stands at 1.3755.

The US DOLLAR (currency:USD) has continued to perform weakly following Friday afternoon’s monthly American jobs numbers. Once again, the employment creation element of the data missed expectations and a downward revision to last month’s counterpart figure twisted the knife into the Buck. However, the Greenback has lost a lot of ground in a short space of time and the US Federal Reserve is still expected to be the first major world central bank to hike interest rates. The outlook for the Dollar is therefore NEUTRAL TO POSITIVE and the GBP USD exchange rate sits at 1.5430.

The AUTRALIAN DOLLAR (currency:AUD) has outperformed almost all of the other sixteen most actively traded global currencies so far on Friday thanks to a generalised improvement in global risk appetite. The closely-monitored VIX ‘Fear Index’ has dropped by almost 13% on the day as international investors price-in the clear-cut outcome to the UK’s General Election. The Reserve Bank of Australia’s early-week signal that its latest interest rate cut is the last of its current policy easing cycle is likely to prop up the Aussie for months to come. Leading analysts forecast that the Australian unit will put in a NUTRAL TO POSITIVE performance moving forward and the GBP AUD exchange rate stands at 1.9540.

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