Pound Dollar Exchange Rate Forecast: GBP/USD Predicted to Fall if 'Risk-off 'Trading Persists

Modified: Thursday, 14 November 2013 10:21 BST - Written by John Cameron

STORY LINK Pound Dollar Exchange Rate Forecast: GBP/USD Predicted to Fall if 'Risk-off 'Trading Persists

The US Dollar (USD) enjoyed a positive finish to yesterday’s session thanks to a strong uptake for 10-year gilts at the latest US debt auction. Meanwhile, the Canadian Dollar (CAD) received a boost during late trading thanks to a vote of confidence from a leading credit ratings agency.

The US government’s successful auction of $24bn worth of 10 year treasury bills last night showed that demand for safe-haven assets remains strong amongst the investment community in spite of the ongoing rally in global stock markets. The American T-Bill has long been considered the ultimate safe haven asset, so yesterday’s bid-to-cover of 2.70 (compared to a previous level of 2.58) and higher yield on the gilts of 2.75% (up from 2.66%) suggests that institutional investors are not overly-optimistic regarding the future prospects for the global economy.

The Pound US Dollar exchange rate (GBP/USD) is trading up 0.79% at 1.6016 GBP/USD

The strong uptake for the benchmark 10-year US Dollar-denominated government bonds sent the Pound US Dollar exchange rate tumbling back down towards the 1.6000 threshold in after-hours trading last night. Further losses could be in store for GBP USD if yesterday’s ‘risk-off’ trading environment persists.

Remaining on the topic of governmental debts, yesterday’s session also saw leading credit ratings agency S&P confirm Canada’s AAA credit rating. The development is likely to send the GBP CAD exchange rate lower throughout the remainder of this week’s session. However, not all of the ratings agencies view the export-driven North American state as a ‘good bet’; only eight nations retain a AAA credit rating from all of the leading ratings agencies. These are : Australia, Denmark, Finland, Germany, Netherlands, Norway, Sweden and Switzerland. Significantly, seven of these eight are located in Europe, but only three of them use the euro as their currency. This figure gives credence to the ruling UK Conservative Party’s assertion that Britain should remain in the EU without being part of the eurozone.

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