Foreign Exchange Rates : Currency Predictions - GBP, USD, EUR, AUD, CHF

July 25, 2011 - Written by John Cameron

STORY LINK Foreign Exchange Rates : Currency Predictions - GBP, USD, EUR, AUD, CHF

POUND STERLING

The Pound has traded within a relatively narrow range as trader’s side towards caution ahead of tomorrow’s Q2 GDP announcement. Despite last week’s announcement that Retail Sales figures were up for the month of June, the expectation is that GDP will be down from (0.5%) in the previous quarter to an expected (0.2%) for Q2. This figure is key to the outlook for the UK economy for the latter part of this year and any deviation from the expected figure could see an aggressive move in either direction. We would expect the figure to come out in line with expectations and the pound to continue to suffer trading on the back foot amongst the majority of majors. NEAR-TERM OUTLOOK – NEAR TERM OUTLOOK -NEUTRAL TO NEGATIVE


US DOLLAR – The Pound Dollar exchange rate (GBP/USD) is 1.6281

There has been a clear shift in investor focus from Eurozone sovereign debt contagion to the current US debt crisis. It is widely expected that a resolution will be reached prior to the August 2nd deadline however currency fluctuations from today would appear to indicate that the market is pricing in at least some chance of a default of US debt. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE.


EURO – The Pound Euro exchange rate (GBP/EUR) is 1.1342



The announcement for the support package for Greece last week has benefited most European countries as fears of contagion subside. It does however seem now that a Greek default is inevitable and traders are calling for a EUR/USD retracement back towards 1.38 as a result. The Euro is being fundamentally supported by its yield and Credit Suisse overnight credit default swaps are still pricing in another 25Bp hike in rates over the next 12 month period. We would expect the Euro to therefore hold a position of strength against the Pound as long the BOE holds a dovish stance on UK interest rates. NEAR-TERM OUTLOOK – NEUTRAL TO POSITIVE.


AUSTRALIAN DOLLAR – The Pound Australian Dollar exchange rate (GBP/AUD) is 1.5005

The Australian Dollar has strengthened on as expected PPi figures, market participants feel that the Royal Bank of Australia may still be prompted to raise interest rates in the coming 6 month period. The RBA has made it clear that inflation levels will be the key determining factor to interest rate policy and markets therefore are pay close attention to any leading indicator. NEAR-TERM OUTLOOK – NEUTRAL TO POSITIVE



SWISS FRANC – The Pound Swiss Franc exchange rate (GBP/CHF) is 1.3123


The Swiss franc has moved to a position of all time strength against most of the majors following Moody’s downgrade to Greek debt. Investors have flocked to the safe haven Swiss Franc in recent months and it is hard to see a reversal anytime soon. We are currently seeing an extremely risk averse market and currencies such as the Swiss franc will likely continue to strengthen in line with other safe haven commodities. Gold has hit an all time high of 1624.30 and could continue upwards in the current uncertain climate. NEAR-TERM OUTLOOK – POSITIVE


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