Pound Sterling Forecast Climbs versus Australian Dollar (AUD) and New Zealand Dollar (currency : NZD)

September 29, 2016 - Written by Toni Johnson

STORY LINK Pound Sterling Forecast Climbs versus Australian Dollar (AUD) and New Zealand Dollar (currency : NZD)

Global investors are holding their breath at the prospect of another US interest rate hike before Christmas. The Pound US Dollar exchange rate has spent much of this week’s session lodged in the 1.2000s GBP USD as a consequence and analysts forecast that there could be further losses to come for the pair moving forward.

USD Investors Watch as Fed Chair Janet Yellen Testifies before Lawmakers

With this in mind, the market sat up and took notice when the Federal Reserve Chair Janet Yellen testified before US lawmakers yesterday. America’s chief policymaker made some interesting observations, noting that,

‘Our post-crisis approach to regulation and supervision is both forward-looking and tailored to the level of risk that firms pose to financial stability and the broader economy. Standards for the largest, most complex banking organisations are now significantly more stringent than standards for small and medium-sized banks, which is appropriate given the impact that the failure or distress of those firms could have on the economy...We anticipate taking additional actions in the near term to further tailor our regulatory and supervisory framework.’

Markets Spooked by Yellen Suggestions of Weak Global Banking; AUD, NZD Exchange Rates Soften

In a week when observers have questioned the creditworthiness of one of the Euroland’s top banks – Deutsche Bank – Yellen’s words appeared particularly prescient. She went on to note that,
‘even as we finalize the major elements of post-crisis reform, our work is not complete. We must carefully monitor the impact of the regulatory changes we have made and remain vigilant regarding the potential emergence of new risks to financial stability. We must stand ready to adjust our regulatory approach where changes are warranted. The work we do to ensure the financial system remains strong and stable is designed to protect and support the real economy that sustains the businesses and jobs on which American households rely.’

The mere suggestion from the Fed Chair that the global banking sector is in need of ever more robust regulation has the potential to spook investors. A move to a ‘risk-off’ trading environment has the potential to send the Pound Sterling (currency : GBP) sharply higher against the risk-driven Australian Dollar (currency : AUD) and New Zealand Dollar (currency : NZD) in the short-to-medium term.

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TAGS: Pound Sterling Forecasts