GBP/AUD & GBP/NZD Exchange Rates: Will US Federal Reserve Begin Tapering QE In September?

Modified: Wednesday, 21 August 2013 10:39 BST - Written by David Woodsmith

STORY LINK GBP/AUD & GBP/NZD Exchange Rates: Will US Federal Reserve Begin Tapering QE In September?

The future direction of the GBP AUD and GBP NZD exchange rates hinges on tonight’s US Federal Reserve minutes. Any suggestion that QE is here to stay in the US could send both pairs sharply lower.

The Pound New Zealand Dollar exchange rate is currently trading up 1.04% at 1.9623 GBP/NZD. The New Zealand Dollar Pound exchange rate is currently trading at 0.5096 NZD/GBP.

Speculation regarding the US Federal Reserve’s future policy direction has reached fever pitch during the past 24hrs as the minutes of the US central bank’s policy meeting, due for release this evening, loomed large in the minds of investors.

Some nations were gripped by QE fear more than others, as evidenced by the relative movements of their respective stock indices. The South East Asian equities markets were particularly hard-hit by rumours that the days of ‘easy money’ in the world’s largest economy may be numbered. Indonesia was, until recently, considered to be a leading light amongst Asia’s emerging markets and was considered by many analysts to be the next ‘big thing’. However, the nation’s Jakarta Composite Index dropped by almost 5% during Tuesday’s session as market participants fretted that institutional investors are about to be starved of the ready credit which the Fed has been feeding them with during recent years. The leading Indonesian share market has now tumbled by more than 20% from its near-term peak, meaning that it has officially entered a dreaded ‘bear market’.

However, a reduction in the $85bn per month which the Fed currently pumps in to its QE programme is by no means the ‘done deal’ which many analysts are pricing-in. Federal Reserve Bank of St. Louis President James Bullard has had plenty to say on this matter during recent times. Bullard re-stated his opinion during the middle part of last week when he suggested that Fed policymakers required more data regarding the condition of the US economy before opting to begin tapering QE. Bullard’s views appear to be generally shared by the Fed Chairman Ben Bernanke who seems to be convinced that it is too early for America’s lender of the last resort to take away the crutch of QE. If tonight’s minutes suggest that there may be no withdrawal of asset purchase until next year, then expect the GBP AUD and GBP NZD exchange rates to retrace back down towards the 1.7000 and 1.9300 levels respectively.

International Money Transfer? Ask our resident FX expert a money transfer question or try John's new, free, no-obligation personal service! ,where he helps every step of the way, ensuring you get the best exchange rates on your currency requirements.

TAGS: Australian Dollar Forecasts Daily Currency Updates New Zea Forecasts