Exchange Rate Forecast - GBP, EUR, USD, AUD, NZD

July 29, 2011 - Written by John Cameron

STORY LINK Exchange Rate Forecast - GBP, EUR, USD, AUD, NZD

POUND STERLING

The Pound weakened in trade this morning against the majority of majors. The most notable fall was a move to 1.2904 vs the Swiss Franc. The outlook for the Pound remains decidedly bearish despite the slight recovery this afternoon. This retracement represents a focus shift to more urgent matters occurring in the US. NEAR-TERM OUTLOOK – NEUTRAL - NEGATIVE

US DOLLAR – The Pound Dollar exchange rate (GBP/USD) is 1.6461

As discussed this morning, the main event was the Q2 GDP figures from the US at 1330. The growth figure was tepid at best with the annualized 1.3% figure coming in well below median forecasts calling for a 1.8% expansion in growth. The EUR/USD pair gained a cent in an hour and the cable pair GBP/USD has jumped 2 cents in the past two hours and is still rallying as we come to the close. Slower job growth as well as an almost non-existent move to income is holding back the US economy and could therefore potentially support the argument for a third round of QE. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE.


EURO – The Pound Euro exchange rate (GBP/EUR) is 1.1442

This morning’s Euro-Zone CPI estimate came in at 2.5%, slightly under the expected 2.7%. This is the lowest reading since February and means that the ECB may well hold on any further rate hikes for the near term. The ECB’s target inflation rate is 2% and as price growth comes back towards this target the ECB will be far less inclined to raise rates further in such stagnant growth conditions. NEAR-TERM OUTLOOK – NEUTRAL TO NEGATIVE


AUSTRALIAN DOLLAR – The Pound Australian Dollar exchange rate (GBP/AUD) is 1.4974

The Australian Dollar has rapidly retraced moving up 2.5 cents against the Pound back to 1.50. This is an aggressive move in a short space of time as we see wild swings in risk based sentiment. We would expect a move back towards the lows next week as the markets settle down. NEAR-TERM OUTLOOK – NEUTRAL TO POSITIVE

NEW ZEALAND DOLLAR – The Pound New Zealand exchange rate (GBP/NZD) is 1.8765

The New Zealand dollar maintains a position of remarkable strength against most of the majors, we would argue that it could be over extending and we may see some retracement before further downside. NEAR TERM OUTLOOK – NEUTRAL To NEGATIVE

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