Exchange Rate Forecasts: Pound Sterling, Euro, US Dollar and the Australian Dollar

Modified: Monday, 5 January 2015 09:42 BST - Written by John Cameron

STORY LINK Exchange Rate Forecasts: Pound Sterling, Euro, US Dollar and the Australian Dollar

The POUND STERLING (currency:GBP) started out Friday’s session in bullish form after the release of better than anticipated Mortgage Approval data; however, Sterling soon lost its lustre as market participants priced-in a disappointing UK PMI survey of the UK’s manufacturing sector. The upshot saw the British tender give up ground against both the Buck and the euro and although further losses cannot be ruled out, the Pound is forecast to trade with a NEUTRAL TO POSITIVE bias moving forward. However, any suggestion from the bank of England that British interest rates will remain low for a significant time could hamper Sterling’s progress.

Euro Slumps to 6 ½ Year Low vs Sterling

Much hinges upon the coming month for investors holding the EURO (currency:EUR). Friday’s session saw the single currency slump to its lowest level versus the Pound since August 2008 and matters could be about to get much worse for euro-holders if European Central Bank President Mario Draghi announces all-out Quantitative Easing for the eurozone on 22nd January. Concerns that the Greek general election later this month may yield an anti-EU coalition government added to the single currencies woes. The outlook for the euro remains fervently NEGATIVE and the GBP EUR exchange rate stands at 1.2812.

US Dollar Climbs Despite Downbeat Manufacturing Data

The US DOLLAR (currency:USD) pushed ahead against all of the other major global currencies during Friday’s session, sending the GBP USD exchange rate down into the 1.5300s for the first time since August 2013. The Dollar’s gains were curbed by a disappointing ISM Manufacturing survey, but investors are likely to set this to one side and instead concentrate on the fact that the US Federal Reserve remains years ahead of the world’s other major central banks with regard its monetary policy. Analysts forecast that the Greenback will continue to trade on a NEUTRAL TO POSITIVE footing into the medium term and the GBP USD exchange rate stands at 1.5396.

Australian Dollar Forecast to Benefit from ECB Quantitative Easing

The AUSTRALIAN DOLLAR (currency:AUD) posted strong gains against Sterling on Friday as analysts priced-in a higher likelihood that Thursday’s European Central Bank policy announcement will bring all-out Quantitative Easing for the euroland. The prospect of a fresh shot of easy money from one of the world’s leading central banks is likely to support the risk-sensitive Aussie Dollar during coming sessions. However, recent comments from Reserve Bank of Australia policymakers suggesting that their next move could be an interest rate cut are likely to anchor the Aussie moving forward. The short term outlook for the Australian unit is NEUTRAL TO POSITIVE and GBP AUD stands at 1.8965.

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