Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast To Gain as Investors 'Risk Off ' Trading

Modified: Thursday, 21 November 2013 13:49 BST - Written by David Woodsmith

STORY LINK Pound Sterling to Australian Dollar (GBP/AUD) Exchange Rate Forecast To Gain as Investors 'Risk Off ' Trading

It was the high-yielding Commodity Dollars, the Australian Dollar (currency:AUD) & New Zealand Dollar (currency:NZD), which bore the brunt of ‘risk off’ trading environment engendered by last night’s Federal Reserve FOMC policy committee meeting minutes. The notes from Fed policymakers’ latest get-together once again stated that America’s central bank fully intends to begin tapering its $85bn per month Quantitative Easing programme sooner rather than later.

In a significant development, the Fed memos revealed that the overall level of unemployment in the US was not the only criteria for the timing of a tightening of monetary policy in the world’s premier economy. Previously the Fed has always insisted that a reduction of the level of joblessness below the 7.0% threshold would be required in order to raise interest rates, but this dogmatic mantra was, at least in part, jettisoned last night.

GBP/AUD exchange rate is currently trading up by 0.68% at 1.73721 GBP/AUD

The relatively hawkish tone of last night’s Fed minutes replicates a pattern of recent releases from America’s lender of the last resort. The Fed Board’s official policy status, as evidenced by the minutes of its meetings, has consistently stated that the days of QE are numbered. However, public comments from the current and future Fed Chairmen, in the form of Ben Bernanke and Janet Yellen, have been far more supportive of America’s asset purchase scheme. It is possible that Bernanke and Yellen are attempting to inject an element of uncertainty into the timing of any cut to QE following the wild market movements which the Fed’s assertion that QE was on the way out triggered back in May when the idea was first floated.

The Pound Australian Dollar Exchange Rate is Likely to Spiral as Investors Shift out of Risk

If QE is indeed almost over, then the Pound Australian Dollar exchange rate is likely to spiral as investors shift out of risk. This morning’s comments from Reserve Bank of Australia Chairman Glenn Stevens, which left open the possibility that the RBA may step into the market in order to actively weaken the Aussie, has the potential to send the GBP AUD higher in the medium term. However, the pair would have to break though its extant multi-year high which stands within 2c of the pair’s current trading rate, before any such move would be possible.

Key Australian Dollar Exchange Rates (21/11/2013 10:45GMT)

The Australian Dollar to Canadian Dollar exchange rate is trading down 0.01% at 0.96959 AUD/CAD.
The Australian Euro to Pound Sterling exchange rate is trading down 0.72% at 0.68964 AUD/EUR.

The Australian Dollar to Pound Sterling exchange rate is trading down 0.69% at 0.57558 AUD/GBP.
The Australian Dollar to New Zealand Dollar exchange rate is trading down 0.01% at 1.12857 AUD/NZD.
The Australian Dollar to US Dollar exchange rate is trading down 0.01% at 0.92625 AUD/USD.
The Euro to Australian Dollar exchange rate is trading up 0.01% at 1.45062 EUR/AUD.

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