Currency Exchange Rate Forecasts: Pound Sterling (GBP), Euro (EUR), US Dollar (USD) & Australian Dollar (AUD)

Modified: Monday, 18 November 2013 17:27 BST - Written by Tim Boyer

STORY LINK Currency Exchange Rate Forecasts: Pound Sterling (GBP), Euro (EUR), US Dollar (USD) & Australian Dollar (AUD)

The POUND STERLING has struggled to assert itself against the other major currencies over the past week. The Pound has been hampered by the latest UK inflation numbers, published during the early part of last week, which have lead institutional investors to shy away from holding Sterling-denominated assets. If the Bank of England doesn’t have to tighten monetary policy, then why would it risk jeopardising Britain’s economic recovery by raising rates? Wednesday’s BoE minutes will give market participants further clues on UK rates, in the meantime Sterling is forecast to trade on a NEUTRAL TO NEGATIVE footing.

The EURO has put in another solid performance against Sterling today, sending the GBP EUR exchange rate down from the mid-1.1900s in early trading to 1.1900 on the nose a short time ago. The single currency appears to be benefitting from the European Central Bank’s decision to trim its key lending rate earlier this month – a positive action which is likely to support the eurozone’s tentative economic recovery in the medium term. Tomorrow’s German ZEW Index provides the nearterm highlight for the euro which is expected to trade with a NEUTRAL TO POSITIVE bias in the short term.

The US DOLLAR has endured yet another disappointing session on the day today. However, all the indications are that there could be worse to come for the Greenback following comments from Janet Yellen last week. The Federal Reserve Chairperson elect observed that the Fed’s $85bn Quantitative Easing programme has provided a major crutch for America’s economy in recent years and went on to hint that it will remain in place for some time after she takes the reins at America’s central bank early next year. A heavy US data schedule for this week could alter this, but in the meantime the outlook for the Buck is NEGATIVE.

The AUSTRALIAN DOLLAR has staged a mini-recovery against Sterling during the past two trading days. No doubt comments from the next head of the Fed Janet Yellen last week suggesting that QE will continue at its current $85bn per month in the States have assisted the Aussie, however comments from the Reserve Bank of Australia have also helped. Recent rhetoric from Australia’s central bank has suggested that the next shift if Aussie interest rates may not necessarily be to the downside. Analysts are forecasting that the Australian unit will trade on a NEUTRAL footing moving forward.

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