British Pound to Dollar Rate Falls as Foreign Exchange Markets Digest FED Chair Speech

August 26, 2016 - Written by Toni Johnson

STORY LINK British Pound to Dollar Rate Falls as Foreign Exchange Markets Digest FED Chair Speech

The British pound to Dollar Exchange Rate Hits Low of 1.3141

Yellen’s words have stoked market rumours that the Fed may be about to increase the cost of borrowing Stateside at next month’s policy meeting.

The Pound Dollar exchange rate slid to an intraday low of 1.3141 GBP USD as a consequence and the pair is forecast to trade on a neutral to negative footing in the near-term as a consequence.

Japanese Yen (JPY) Exchange Rates Come Under Pressure

Data published in Japan during last night’s Asian session has heaped pressure on the Japanese Yen (currency : JPY), but its effect could alter the relative value of several other major global currencies.

Last month’s edition of Japan’s National Consumer Price Index data showed that prices in Asia’s second economy contracted for the fifth month on the trot, leading many analysts to surmise that the Bank of Japan (BoJ) will be forced to further loosen its already ultra-loose monetary policy.

The BoJ resisted pressure to cut its benchmark interest rate below zero for many years in the wake of Japan’s banking crisis of the 1990s.

High-Risk Currencies like AUD, NZD, CAD Could Gain

However, the Tokyo central bank relented earlier this year when it surprised the markets by dropping the domestic cost of borrowing to -0.10%.

Another rate cut before the end of the year therefore appears unlikely, so analysts forecast that if the BoJ does indeed opt for further policy loosening, it may take the shape of more and deeper Quantitative easing, perhaps heralding a stark increase to Exchange Traded Fund (ETF) purchases.

Such a move would favour the risk-driven Australian Dollar (currency : AUD), New Zealand Dollar (currency : NZD) and Canadian Dollar (currency : CAD).

US Dollar (USD) Exchange Rates Fluctuate on Yellen Commentary

Elsewhere, support for the US Dollar (currency : USD) has ebbed this afternoon following comments from US Federal Reserve Chair Janet Yellen at the Jackson Hole Economic Symposium.

Yellen told her audience that the case for hiking US interest rates has strengthened during recent months, observing that,

‘U.S. economic activity continues to expand, led by solid growth in household spending. But business investment remains soft and subdued foreign demand and the appreciation of the dollar since mid-2014 continue to restrain exports. While economic growth has not been rapid, it has been sufficient to generate further improvement in the labor market. Smoothing through the monthly ups and downs, job gains averaged 190,000 per month over the past three months. Although the unemployment rate has remained fairly steady this year, near 5 percent, broader measures of labor utilization have improved. Inflation has continued to run below the FOMC's objective of 2 percent, reflecting in part the transitory effects of earlier declines in energy and import prices.’

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