Volatility Forecast For Dollar (USD), Australian Dollar (AUD) & New Zealand Dollar (NZD) Following Fed QE

Modified: Thursday, 19 September 2013 16:03 BST - Written by David Woodsmith

STORY LINK Volatility Forecast For Dollar (USD), Australian Dollar (AUD) & New Zealand Dollar (NZD) Following Fed QE

The Pound Dollar exchange rate surged while GBP AUD and GBP NZD dropped following last night’s Federal Reserve policy decision in the States. Analysts’ predictions for the GBP USD, GBP AUD & GBP NZD exchange rates are now mixed following comments from Fed Chairman Ben Bernanke.

The Pound to US Dollar exchange rate (GBP/EUR) is currently trading down by 0.38% at 1.6070 GBP/USD. The US Dollar to Pound exchange rate is currently trading at 0.6223 USD/GBP.

Sterling has surged against the US Dollar following last night’s surprise decision by the US Federal Reserve FOMC not to turn off the Quantitative Easing tap just yet. Analysts had been pricing-in a $10-15bn reduction to the Fed’s controversial asset purchase scheme, so the ‘no change’ decision has hit the Greenback hard, sending the GBP USD exchange rate up to as high as 1.6164 overnight. This represented Cable’s highest level since the middle part of January.

The Fed announcement had a pronounced effect on other Sterling currency pairs as well as Cable, with the high-yielders generally enjoying good gains on the day. The GBP AUD exchange rate tumbled into the 1.6800s followed the Fed’s statement, while the GBP NZD exchange rate has fallen to close to the 1.9000 threshold during today’s European session. Gains for the Kiwi were accentuated following last night’s stronger than anticipated New Zealand Gross Domestic Product data which showed that economic activity expanded by a year-on-year 2.5% during the three months to the end of June.

However, Bernanke’s comments which followed the Fed announcement have introduced a high degree of uncertainty into the minds of market participants. The Fed Chairman observed that the overall level of unemployment in the US will continue to determine the FOMC’s thinking regarding the timing of a tapering of its controversial asset purchase scheme. Previously Bernanke had stated that the overall rate of US joblessness would have to fall below the 7.0% threshold before a QE reduction would be countenanced. Last night saw the Fed Chairman reduce this figure to 6.5%, whilst also stating that ‘there is no magic number which we are shooting for’. Bernanke added to investors’ indecision by observing that the FOMC ‘could move later this year’ on a QE reduction. If the Fed Chairman doesn’t know the likely direction of US monetary policy, then further market volatility would appear to be the only thing market participants can rely on.

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: American Dollar Forecasts Australian Dollar Forecasts Currency Predi Forecasts