Exchange Rate Forecasts: Pound Sterling to US Dollar, Australian & New Zealand Dollars Negative

Modified: Monday, 15 July 2013 08:54 BST - Written by James Fuller

STORY LINK Exchange Rate Forecasts: Pound Sterling to US Dollar, Australian & New Zealand Dollars Negative

A slightly disappointing showing from Friday afternoon’s Michigan sentiment index in the States was not enough to stop the benchmark US Dow Jones share index and the broader-ranging Chicago-based S&P 500 closing at record highs of 15,464 and 1,680 respectively. Although the Michigan index is a regionalised gauge of optimism amongst economic participants it is still closely-monitored by analysts as a middle-American bell-weather of the US economy as a whole.

The continued uptrend in America’s share markets which culminated in Friday’s all-time highs for the US’s two premier stock indices was due to a generally positive showing from most companies publishing their end of year figures over a busy couple of weeks, but the primary cause of the continued upward shift in equities was attributable to one man and one man only – Bernanke. The Fed Chairman’s comments of the middle part of last week, which questioned the veracity of recent US labour market data and suggested that the Fed’s Quantitative Easing programme was here to stay for some time to come, triggered an uptick in appetite for risk which will be difficult to reverse in the near-term.

Even the admission from China’s Finance Minister that it was likely that his nation’s growth rate might fall below the 7% threshold later this year was not enough to slake global investors’ appetite for risk-laden assets. Key risk events of note for this week which have the potential to elicit a renewed flight to safety from market participants include this afternoon’s US Advance Retail Sales data for last month and Fed Chairman Bernanke’s twice yearly Policy Report which he delivers to the US Senate on Wednesday and Thursday afternoons. It seem highly unlikely that the top man at the Fed will have changed tack since last week, so expect more pro-QE rhetoric when Wednesday comes around. Such an outcome would be likely to see the exchange rate forecasts for the Pound to US Dollar exchange rate (GBP USD) head back down below the 1.5000 level and exchange rate forecasts for the Pound to Australian Dollar (GBP AUD) & Pound to New Zealand Dollar (GBP NZD) exchange rates also test lower.

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