US Federal Reserve Holds Rates, Pound Sterling GBP Forecast to Fall vs AUD NZD CAD

September 18, 2015 - Written by David Woodsmith

STORY LINK US Federal Reserve Holds Rates, Pound Sterling GBP Forecast to Fall vs AUD NZD CAD

FOMC Leaves Rates on Hold: Pound Sterling Exchange Rate Trends Lower Today

Yesterday evening’s announcement from the US Federal Reserve that it will be maintaining its benchmark interest rate at its current record low banding of between 0.0% and 0.25% was not wholly unexpected. However, the voting pattern of the policymakers and their respective ‘dot plots’ certainly did surprise investors, as did the tone of Fed Chair Janet Yellen’s press conference which followed.

GBP to AUD, NZD Conversion Rates Softer, Fed May Not Hike in 2015

The ‘dot plot’ has become a vital piece of Fed Watchers’ armoury since Janet Yellen took the helm at the US central bank two years ago. Macro-economic forecasts published by the Fed at the time of each of its policy announcements contain a ‘dot plot’ prediction by each policymember of where they believe US interest rates will lie at the end of this year and at the end of the next few years. Analysts pore over the charts to surmise the likely trajectory of US policy and last night’s version made for interesting reading. In June, the ‘dot plot’ showed that Fed members saw US interest rates at 0.6% by the end of this year, but last night’s edition saw a median forecast of 0.4% by these same Fed policymakers for 31st December, 2015. However, joining the dots also revealed that 13 of the 17 voting members still believe that the Fed will be hiking rates this side of Christmas.

Foreign Exchange ALERT: US Dollar Exchange Rate Falls Today on Dovish FOMC

The vote on whether to hike this month was firmly won by the ‘no’ camp by 9 – 1, with the sole dissenter long-time hawk Lacker. The magnitude of this decision surprised some market participants and hurt the US Dollar (currency : USD) sending the Pound Sterling US Dollar exchange rate up into the 1.5600s. Analysts forecast that there could be more upside to come for this pair before the weekend market close as investors factor-in continuing low rates Stateside.

Pound Down from Best Rates against the Australian Dollar, New Zealand Dollar

Meanwhile, Yellen’s acceptance during her post-decision press conference that the, ‘outlook abroad appears to have become more uncertain, and there has been notable volatility in financial markets,’ suggests that Fed policy ‘lift-off’ may still be some way off. The Commodity Dollars clawed back a portion of their recent losses against the Pound Sterling (currency : GBP) as a consequence, sending the GBP AUD and GBP NZD exchange rates down into 2.1400s and 2.4200s respectively.

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