Pound Sterling Exchange Rate Forecast For US, Australian, Canadian & New Zealand Dollar to Gain

Modified: Thursday, 31 October 2013 08:59 BST - Written by John Cameron

STORY LINK Pound Sterling Exchange Rate Forecast For US, Australian, Canadian & New Zealand Dollar to Gain

Pound Sterling Exchange Rate Forecast For US, Australian, Canadian & New Zealand Dollar to Gain:

The surprising tone of last night’s Federal Reserve announcement has triggered gains for the US Dollar. Meanwhile, the Commodity Dollars have incurred losses for the same reasons.

The Pound US Dollar exchange rate (GBP/USD) is currently trading down by 0.18% at 1.6021 GBP/USD. The US Dollar Pound exchange rate is currently trading at 0.6242 USD/GBP.

Last night’s Federal Reserve FOMC policy announcement triggered a flurry of market activity in spite of the fact that the US central bank announced that it would be maintaining its current policy stance. In truth, most economists were expecting the Fed to maintain its controversial Quantitative Easing programme at its current level of $85bn per month and you would have struggled to find a single analyst who was predicting any alteration to the Fed’s interest rate before the decision.

However, the relatively ‘go ahead’ tone of the US central bank’s accompanying statement did come as a surprise to investors. The note observed that there had been a general improvement in the American economy in recent months in spite of the partial government shutdown which marred the early part of this month. The Fed did admit that it would need to see further evidence that economic conditions in the States are improving before it will begin tapering QE, but its general assessment of US economic conditions dropped a heavy hint that a reduction to the $85bn per month which it is currently allocating to asset purchases will be reduced sooner rather than later.

Most analysts had been anticipating a downbeat missive from the US central bank following the damaging Democrat / Republican debt standoff which is likely to have knocked up to 0.75% off America’s Q4 GDP figure. The tone of the Fed’s release therefore provided the Greenback with a boost, sending the Pound US Dollar exchange rate (GBP/USD) down towards the 1.6000 threshold in the ten minutes which followed the release, (the pair had been trading above 1.6200 during the early part of this week’s session).

Global stocks also registered instant losses on the back of the Fed statement, with the benchmark S&P 500 index dipping by over a third of a percentage point in the immediate aftermath of the publication. This move signifies a dip in global risk sentiment which is likely to send the Pound Australian Dollar (GBP/AUD), Pound New Zealand Dollar (GBP/NZD) and Pound Canadian Dollar (GBP/CAD) exchange rates higher in the short term.

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