Exchange Rate Forecast

Exchange rate forecasts and foreign currency news

Global downturn as market fears dominate headlines

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Sterling exchange rates continue to slide?

Pound Sterling - GDP exchange ratesThe value of the Pound has been undermined so far in 2016 due to the uncertainty surrounding the forthcoming EU referendum, leaving the Pound outperformed by most major currencies since the turn of the year. A weaker GDP forecast, dovish comments from the Bank of England along with a widening trade gap between the UK and the rest of the world have taken their toll on Sterling, and anyone looking to sell Sterling may wish to do so sooner rather than later as the UK’s continued membership within the EU is at threat to the Pound’s strength and the global downturn and European bank stress apply pressure to the ‘open economy’ of the UK.

Personally I cannot see Sterling improving in the short term future as the currency is being weighed down by both problems at home and abroad, although should we see an upturn in global markets I believe the Pound will receive that news positively and we could see a return to levels we saw at the end of last year.

In other news… Yen Surges as US Dollar wanes

Yesterday we saw financial markets dominate the headlines once again as fears over the global downturn created further volatility in equity markets and foreign exchange rates. Arguably the most notable movements yesterday occurred over in Japan as the Nikkei plunged 5% as the US Dollar slid to 15-month low versus the Japanese Yen. This has been the greenback’s worst week against the Japanese Yen since 2008 as concern within the banking systems coupled with fears over the global economic slowdown have caused investors to seek safe havens, with the Yen traditionally being considered safe territory along with the Swiss Franc and Gold for example, with the precious metal strengthening by 5% yesterday and hit a one year high.

FX Roundup: Euro falters as Japanese Yen spikes during Yellen speech

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Mixed outcome follows Janet Yellen’s speech yesterday afternoon

Yesterday’s trading session saw mixed outcomes for currency rates as Federal Reserve Chairlady Janet Yellen gave a dovish speech and dampened investors’ hopes of a rate hike in the short term future. Her dovish tone and comments such as, “Financial conditions in the US had become less supportive of economic growth and could weigh on the outlook should they persist” weighed on the US Dollar yesterday as we saw the greenback fall to a 15 month low against the Japanese Yen as investors piled into the currency considered a safe haven by many, with the Dollar hitting a session low of 113.74 against the Yen whilst down over 1 per cent at the time.

US dollar - WashingtonWith next month’s interest rate hike now looking more unlikely we saw the US Dollar weaken against the Australian Dollar (down 0.27% trading at exchanging at US$0.7089), the new Zealand Dollar (up 0.3% against the dollar exchanging at US$0.6658) and remain relatively flat versus Sterling which has seen a lot of weakness as of late due to political uncertainty surrounding the potential ‘Brexit’ and weakness amongst European banks, to name just a few.

What can investors expect from this point onwards?

Moving forward I believe we could see further weakness in the greenback currency as the chance of an originally planned March interest rate hike by the fed looks increasingly uncertain, although there is potential for a sharp rebound should rates increase. I don’t expect investors buying Dollars with Sterling to benefit much from this drop in the short term future as I can see Sterling continuing its recent downward trend as speculation surrounding the ‘Brexit’ continues. I would suggest that Euro sellers consider making their transfers sooner rather than later to capitalise on the recent gains made by Euro against both the Dollar and Pound as I don’t expect this trend of a strengthening Euro to rally for much longer, especially as talk of potential further quantitative easing is on the cards.