British Pound Outlook vs Euro, NZ, US Dollar Exchange Rates Hinges on Trio of Central Bank Decisions

September 20, 2016 - Written by Frank Davies

STORY LINK British Pound Outlook vs Euro, NZ, US Dollar Exchange Rates Hinges on Trio of Central Bank Decisions

Pound Sterling, US Dollar, Japanese Yen and New Zealand Dollar Exchange Rate Fluctuations Depend on Central Bank Decisions

With three key central bank interest rate decisions ahead, notable volatility for Pound Sterling (GBP), US Dollar (USD) and New Zealand Dollar (NZD) exchange rates is likely.

Global currency market investors are eyeing a triumvirate of global central bank decisions coming up on the horizon and the upshot is having a pronounced effect on the relative value of several leading global currencies.

BoJ Decision Could Stabilise Japanese Yen (JPY) Exchange Rate

Japanese Yen (JPY) exchange rate movement can be expected tomorrow as the Bank of Japan (BoJ) leads the way during the early hours of the morning in what leading strategist Philip Marley of Rabobank earlier described as, ‘the biggest unknown’, of tomorrow’s decisions. Global stock market movement on the day, which has seen London’s benchmark FTSE 100 index climb by 0.75% with 2 hours of the session remaining, suggests that the BoJ might loosen its policy. With Europe’s bourses registering similar gains, a former BoJ central bank policymaker, Tohru Sasaki, who now works as an analyst at JP Morgan had a theory as to the driver for this ‘risk-on’ trading environment.

Sasaki, along which roughly half of the world’s leading market analysts, believes that Japan’s central Bank will opt to cut its benchmark lending rate further from its current sub-zero level. He noted that, ‘deepening the negative rate would not weaken the yen, but would do the reverse.’ Look for a stabilisation in the forecast performance of Japanese Yen (currency : JPY) exchange rates in the near-term.

US Dollar (USD) Exchange Rates Gain Ahead of Federal Reserve Announcement

Elsewhere, US Dollar (currency : USD) exchange rates are enjoying strong support on the day – a development which has seen the Pound Sterling US Dollar exchange rate drop by 0.61% to a relatively lowly 1.2960 GBP USD. The pair is now within sight of its lowest level since 1985, however this poor performance is by no means guaranteed to persist.

As recently as August, the money markets were pricing-in a 40% likelihood that the US Federal Reserve would be increasing its benchmark interest rate at this week’s meeting. The same money markets now price-ibn only a 20% chance of such an event taking place on Wednesday evening. If they are correct and if the Fed’s accompanying report alludes to the weaker tone of recent US data releases, then Cable could settle back above the 1.3000 GBP USD threshold once again.

RBNZ Rate Freeze Could Send Pound Sterling to New Zealand Dollar (GBP/NZD) Exchange Rates to New Multi-Year Lows

Lastly, the Reserve Bank of New Zealand’s policy announcement follows hot on the heels of the Fed’s and a ‘hold’ decision is considered the most likely outcome. Such a result would further favour the New Zealand Dollar (currency : NZD).

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