Exchange Rate Forecasts For British Pound, US Dollar, Yen and Australian Dollar ref AUD, GBP, USD, EUR, JPY

By Gary Howes

OCBC Bank give us their near-term foreign exchange rate forecasts for the most traded currency pairs.

With the exception of the GBP, the USD pulled higher against the majors following the release of the December FOMC minutes.

"Although there was palpable caution within the minutes with regards to the taper and that members wanted to stress that the taper was not on a preset course, the overall tone did not detract from the perception that the taper would proceed in a gradual manner," says Emmanuel Ng at OCBC Bank.

Ng gives us his latest predictions below: (Note: All quotes are taken from the wholesale spot markets. Your bank will charge a spread on the rate at their discretion. However, an independent FX provider will guarantee to undercut your bank's offer, thus delivering you up to 5% more currency. Please learn more here.)

exchange rate forecasts ocbc

Euro dollar exchange rate forecast (EUR/USD)

Despite better than expected German factory orders and EZ retail sales numbers, the dollar held sway on Tuesday. The ECB meeting today (1245 GMT) and the US labor market report tomorrow may continue to shape the EUR-USD’s time path for the near term and our sense is that risks remain tiled to the downside at this juncture. Note that the pair has left its 55-day MA (1.3618) behind and a break below 1.3564 may confirm our suspicions.

US dollar to Japanese Yen forecast (USD/JPY)

Expect USD-JPY to remain supported on dips pending the event risks over the next two sessions and a 104.30-105.30 range may persist in the interim. Elsewhere, background expectations of a further easing of monetary conditions by the BOJ on account of the planned sales tax hike may also keep the JPY sufficiently vulnerable.

Australian dollar to US dollar forecast (AUD/USD)

We continue to see the AUD-USD drifting in tandem with global undercurrents pending further cues out of China for example. Expect 0.8900 to remain as a near term locus within the recent 0.8820-0.9000 range.

Pound dollar rate forecast (GBP/USD)

The BOE is expected to make no changes to its policy parameters at today’s MPC with the market expected to remain in a wait-and-see mode in the interim.

The first visible cap is expected towards 1.6500 while initial support is seen around 1.6345. As noted previously, background chatter that the central bank may strengthen the dovish undertones of its forward guidance may keep the pair reluctant on the upside for now.