Forecast: Will Pound Dollar (GBP/USD) Exchange Rate See Large Correction in July 2014?

July 17, 2014 - Written by John Cameron

STORY LINK Forecast: Will Pound Dollar (GBP/USD) Exchange Rate See Large Correction in July 2014?

Currency News Forecast: Will the Pound to Dollar exchange rate (GBP/USD) see a significant correction in July 2014? Global share markets have recorded significant losses during early trading today following yesterday’s announcement by the USA and the eurozone that they will be stepping up their economic sanctions against Russia.

The major Western superpowers began their offensive against Russian interests in the wake of Moscow’s annexation of Crimea during the early months of this year. Initially, the sanctions were against a handful of politically significant Russian citizens, however yesterday’s announcement from the US that it would be introducing punitive measures against giant Russian companies including Gazprombank, Novatek and Rosneft, marks a significant change in tack.

The upshot has seen share markets shed support, sending London’s benchmark FTSE 100 index down by 0.55% during morning trading. Frankfurt’s Dax index lost an even greater amount, dropping by 0.67%.

Meanwhile, in the global currency markets the New Zealand Dollar (currency:NZD) lost further support, sending the Pound Sterling New Zealand Dollar exchange rate up to as high as 1.9740 GBP/NZD earlier.

The Kiwi remains under pressure following the publication of a significantly weaker than anticipated set of domestic inflation numbers earlier in the week. Analysts forecast that the near-term forward move for GBP/NZD may not have run its course just yet.

Meanwhile, the primary beneficiary of the flight to quality of the past 24hrs has been the safe-haven Japanese Yen (JPY).

The move has sent the Pound Sterling Yen exchange rate down to as low as 173.3300 earlier as global appetite for risk ebbed. Chris Weston, Chief Market Strategist at IG, observed that, ‘we are starting to see some more tactical, defensive positioning coming through in markets, and I think the yen will benefit from that.’

Meanwhile, the US Dollar (currency:USD), which has lost some of its lustre as a safe haven play during recent months, has also benefitted from the risk-off trading environment, albeit by a lesser amount than the Yen.

The development has seen the Pound to Dollar exchange rate slip to as low as 1.7097 GBP/USD earlier.

Yuki Sakasai of Barclays thinks it likely that the Buck’s allure as a reserve currency will improve during coming weeks thanks to the fact that, ‘recent U.S. economic data have been improving.’ He went on to predict that, ‘as central banks where yields are low are dovish, including the ECB, the Dollar can strengthen versus the euro.”

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