Foreign Exchange Rate Forecast: US Fed and BoJ Decisions to Trigger Currency Price Action Shortly

July 26, 2016 - Written by Ben Hughes

STORY LINK Foreign Exchange Rate Forecast: US Fed and BoJ Decisions to Trigger Currency Price Action Shortly

The near-future will bring the Fed's interest rate decision for July; present predictions have been for no change at 0.50%.

Exchange Rate Predictions for Pound Sterling (GBP), US Dollar (USD) and Japanese Yen (JPY)

Three major global central bank monetary policy decisions are forecast to inform price action for the world’s leading currencies during the next two weeks. Our leading currency analyst considers the outlook for the US Dollar (currency : USD), the Pound Sterling (currency : GBP) and the Japanese Yen (currency : JPY) below …

The US Federal Reserve leads the way in the upcoming central bank fest, making its much-awaited July policy announcement tomorrow evening. The minutes of the most recent Fed policy meeting, which took place during the middle part of last month, noted that,

‘An additional factor in the Committee's policy deliberations was the upcoming U.K. referendum on membership in the European Union. Members noted the considerable uncertainty about the outcome of the vote and its potential economic and financial market consequences. They indicated that they would closely monitor developments associated with the referendum as well as other global economic and financial developments that could affect the U.S. outlook.’

US Dollar Could Fall this Week on Dovish Fed Comments

Fed watchers will be closely watching this week’s policy decision for clues as to the relative weight policymakers are attaching to the recent firmer US jobs data versus the potential downside triggered by the UK’s Brexit vote on 23rd June.

Meanwhile, Britain’s central bank is due to make its latest monetary policy announcement on 4th August. Following the assertion in the latest Bank of England minutes, published last month, that, ‘in the absence of a further worsening in the trade-off between supporting growth and returning inflation to target on a sustainable basis, most members of the Committee expect monetary policy to be loosened in August.’ Given the publication of the worst UK PMI survey since 2009 on Friday, it would appear a given that the BoE will cut rates and that the Pound will suffer as a result.

AUD, NZD, CAD Exchange Rates Forecast to Gain on BoJ Decision

Meanwhile the latest Bank of Japan (BoJ) monetary policy announcement, due in the early hours of Friday morning, is hotly-anticipated. Although the use of ‘Helicopter Money’ has been ruled out by Japanese policymakers, an extension to the nation’s already massive Quantitative Easing programme is thought likely. The Yen is forecast to lose ground as a result, while the Commodity Dollars (AUD, NZD, CAD) are expected to record strong gains.

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