Pound Dollar (GBP/USD) Exchange Rate Drops, AUD & NZD Forecast To Fall

Modified: Friday, 13 December 2013 13:58 BST - Written by Frank Davies

STORY LINK Pound Dollar (GBP/USD) Exchange Rate Drops, AUD & NZD Forecast To Fall

The US Dollar has been the main winner so far today in the global currency markets. Support for the Buck has sent the Pound Dollar exchange rate (GBP/USD) down to its lowest level for two weeks at 1.6265 earlier as institutional investors adjusted their positions to factored-in a higher percentage chance that the US Federal Reserve will be trimming its controversial Quantitative Easing programme next Wednesday. Such a move would allow current Fed Chairman Ben Bernanke to save face and leave the top job at the Fed with his head held high when he retires early next year. Bernanke stated as long ago as May time that America’s central bank would be trimming QE before the year was out, so anything less than a cut next week would see him leave the Fed with egg on his face.

The recent tone of US data releases suggests that a QE taper may well be on the cards for next Wednesday; last week’s Q3 GDP data and labour market numbers from the States suggested that conditions in America’s economy are improving and better than expected domestic Retail Sales numbers for November have added to this picture. The midweek news that a Federal Budget deal had been reached by Republican and Democrat lawmakers has added to the positive sentiment towards the Greenback.

If the Fed does trim its QE programme next year then look for the Australian, New Zealand and Canadian Dollars to lose further ground against Sterling. Such an outcome could send the GBP AUD exchange rate up towards the 1.9000 level, whilst GBP NZD may make a renewed run at the two to one threshold. There could be even greater gains for the GBP CAD exchange rate given the softening in oil prices during recent weeks. Trading rates into the 1.8000s cannot be ruled out for GBP CAD this side of Christmas in such an event.

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TAGS: American Dollar Forecasts Australian Dollar Forecasts Canadian Dolla Forecasts