Pound to Australian Dollar Exchange Rate Forecast Gain As Yellen Euphoria Subsides; Also GBP NZD & CAD

Modified: Thursday, 10 October 2013 10:02 BST - Written by John Cameron

STORY LINK Pound to Australian Dollar Exchange Rate Forecast Gain As Yellen Euphoria Subsides; Also GBP NZD & CAD

Sterling endured a poor session against the Australian, New Zealand and Canadian Dollars yesterday. However, escalating concerns regarding the bitter US debt standoff have the potential to reverse these losses today.

The Pound Australian Dollar exchange rate (GBP/AUD) is currently trading down by 0.94% at 1.6899 GBP/AUD. The Australian Dollar Pound exchange rate is currently trading at 0.5918 AUD/GBP.

A major risk swing in the global markets informed the levels for nearly all of the major currency pairs during yesterday’s session. President Obama’s revelation that he will be nominating Ben Bernanke’s current deputy Janet Yellen as the next Federal Reserve Chair triggered a strong bout of support for the Antipodean Dollars, sending the GBP AUD and GBP NZD exchange rates down to 1.6832 and 1.9142 by the middle part of the trading day. The Canadian Dollar was also well-bid on the session, sending the GBP CAD exchange rate down to as low as 1.6509.

However, the shift into risk-laden assets may well prove to be ephemeral. Investors hovering up Aussie and Kiwi assets on the day were pricing-in a higher chance that the Fed’s Quantitative Easing programme will be extended once Yellen takes up her post, (which she surely now will, given her presidential backing), in the New Year. However, Yellen will be one voice in a committee of voices and it is by no means guaranteed that her presence will ensure the continuation of a scheme which Bernanke promised as long ago as May would begin being phased-out before the end of 2013.

Yellen’s pre-announcement as the next Fed Chief also served to obscure another burgeoning and potentially significant threat to global investor sentiment- the ongoing US debt standoff. The argument between Democrat and Republican lawmakers has become increasingly bitter in recent days, with both sides’ position becoming apparently more intractable. Tuesday night’s comments from President Obama accusing his Republican counterparts of extortion have added fuel to an already incendiary situation and bond market participants reacted accordingly, bidding one month US T-Bill yields up to their highest level since the Autumn of 2008 when Lehman Brothers collapsed and the global financial reached its height.

As investors realise that Yellen’s likely assent is not the panacea to all of the world’s economic problems and as the 17th October deadline for the US to increase its debt ceiling looms ever larger, the GBP AUD, GBP NZD and GBP CAD exchange rates are forecast to head Northwards once more.

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TAGS: Australian Dollar Forecasts Canadian Dollar Forecasts Daily Currency Forecasts