Pound Dollar Exchange Rate Forecast To Plummet On Fed Fears (GBP/USD)

Modified: Tuesday, 17 September 2013 09:41 BST - Written by Tim Boyer

STORY LINK Pound Dollar Exchange Rate Forecast To Plummet On Fed Fears (GBP/USD)

The Pound Dollar exchange rate spiralled to an 8-month high whilst GBP AUD and GBP NZD tumbled on the day yesterday. This price action suggests that a trimming of Quantitative Easing from the Fed is unlikely tomorrow.

The Pound US Dollar exchange rate (GBP/USD) is currently trading up by 0.16% at 1.5899 GBP/USD. The US Dollar Pound exchange rate is currently trading at 0.6290 USD/GBP.

Investors looking for clues on which way the Federal Reserve FOMC might lean during its latest policy meeting, which begins today, were provided with further food for thought when August’s US Industrial Production data was published yesterday afternoon. The headline figure showed that the output of America’s combined industries expanded at a below-expectations 0.4%. The news caused a renewed flurry of selling pressure on the Buck, sending the Pound to US Dollar exchange rate (GBP/USD) up to its highest level for some 8 months at 1.5964 during the middle part of the European trading day.

Meanwhile, the Pound Australian Dollar (GBP/AUD) and Sterling New Zealand Dollar (GBP/NZD) exchange rates tumbled to 1.6970 and 1.9382 respectively as investors got stuck in to risk-laden assets once more. The move away from safe haven investments at the start of one of the most potentially significant weeks in the global currency markets for some time is indicative that institutional investors consider it unlikely that the Fed will be trimming its Quantitative Easing programme this month.

Meanwhile, technical analysts have pointed to the apparent emergence of a set of indicators which suggest that US indices are carving out a ‘Hindenburg Omen’ pattern, with unusually high numbers of individual American stocks posting 52-week highs and 52-week lows concurrently. Traditionally, this signal acts as a predictor for a major stock market correction to the downside. If tomorrow’s Fed decision brings a cut to QE in the States, then this Omen may well be set to come true. In such an event, look for the GBP USD exchange rate to tumble back down towards the 1.5000 level.

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