Exchange Rate Forecasts: GBP EUR To Head Higher, AUD NZD & ZAR Strengthen

Modified: Monday, 7 October 2013 08:54 BST - Written by David Woodsmith

STORY LINK Exchange Rate Forecasts: GBP EUR To Head Higher, AUD NZD & ZAR Strengthen

In an apparently counterintuitive move, the high-yielding currencies registered strong gains against the Pound during the final 24hrs of trading in spite of the continuing debt standoff in the world’s premier economy.

The Pound to Euro exchange rate (GBP/EUR) is currently trading down by 0.03% at 1.1813 GBP/EUR. The Euro to Pound exchange rate is currently trading at 0.8465 EUR/GBP.

Analysts would ordinarily expect the Pound Australian Dollar (GBP/AUD), Pound New Zealand Dollar (GBP/NZD) and Pound South African Rand (GBP/ZAR) exchange rates to tumble while Democrat and Republican lawmakers remained at loggerheads, unable to agree on a federal debt deal. However, movement in the global equities markets on Friday was indicative of investors’ relaxed attitude towards the situation in the States which has the potential to have a highly detrimental effect on global economic activity; the broad-based S&P 500 index, based on the Chicago share market, recorded a healthy gain of 0.71% on the session.

Friday’s ‘risk on’ global trading environment suggests that market participants remain confident that the warring political factions in the US will reach an accord sooner rather than later. However, it is far from guaranteed given Republican lawmakers will relent in their calls for a delay to the controversial ‘Obamacare’ health care reforms as a price for any working agreement. If members of the ‘Grand Old Party’ continue to dig their heels in then look for GBP AUD, GBP NZD & GBP ZAR to turn around and head Northwards once more.

Meanwhile, the US Dollar has also been relatively well supported in the market in spite of the debt standoff in Capitol Hill. The Pound US Dollar exchange rate sank to close to the 1.6000 threshold during early trading last night. Cable has the potential to register further near term losses should this week bring good news from the States regarding a debt deal.

Elsewhere GBP EUR remained in the lower part of the 1.1800-1.1900 range during the final trading session of last week as investors holding euros breathed a collected sigh of relief at last Wednesday’s news from Italy that the incumbent government had survived a vote of no confidence. However, European Central Bank President Mario Draghi’s confirmation that his bank’s policy committee had discussed a cut to its key lending rate for the second month on the trot could send the pair back up toward its multi-month high of 1.1999 which it struck just under a week ago.

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