Weekly Outlook: 2014 - 2015, December 28 - January 04

Pound to Dollar Forecasts 2015 by HSBC, Goldman Sachs and Barclays Exchange Rate Analysts

The outlook for the British pound (GBP) took a negative turn in October and it appears sentiment will struggle to improve as we head through 2015.

A range of forecasts issued by big-name currency analysts, including HSBC, Goldman Sachs and Barclays, confirms the outlook favours the USD over the GBP in the longer-term.

However, the trend lower for the pound to dollar exchange rate (GBP/USD) appears to be less precipitous following the inability to break lower through 1.56 on a number of occassions in November/December.

At the time of writing the GBP to USD is seen at 1.5557.

The forecasted spot levels for the next 12 months are:

Be aware that all our quoted exchange rates are subject to a discretionary spread by your bank, it can differ significantly from the market rate. If you are looking to make international payments we suggest being quoted by an independent provider. By tapping the wholesale markets they can offer up to 5% more currency in some instances.


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Late 2014 remains challenging for the Australian dollar exchange rate complex (AUD) - the Aus has been the 2nd worst performer in the G10 exchange rate complex.

"From high on the love index for most of this year, the AUD had found itself in the proverbial doghouse," notes Prash Newnaha at TD Securities in Singapore.

The declines have come for a number fo of reasons - but where is the currency going to be at the end of 2014 and into 2015?

According to RBA Governorn stevens the Australian currency remains overvalued and must decline substantially before it reaches what he sees as fair value.

Stevens is not alone in his assessment of the currency's valuation - TD Securities join a number of analysts predicting 2015 to be a soft year for the Aussie as it seeks out fair-value.

For reference, at the time of this article's latest update the following Aus dollar rates are noted:

• The Australian to US dollar exchange rate (AUD/USD) is at 0.8179.
• The euro to Australian dollar exchange rate (EUR/AUD) is at 1.5006.
• The pound sterling to Australian dollar rate (GBP/AUD) is at 1.9125.
• The Aus to New Zealand dollar rate (AUD/NZD) is at 1.0568.

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We end 2014 with US CB Consumer Confidence and Unemployment Claims and open 2015 with US ISM Manufacturing PMI. Join our weekly outlook with the main market movers to impact Forex trading. Happy 2015!

Last week, the final revision to US GDP in Q3 came out better than expected, crossing the 4% growth rate for the second consecutive quarter. US economy expanded 5% between July and September, beating the preliminary estimate of 3.9% and the median forecast of 4.3%. The strong expansion indicates the US economy will close 2014 on a strong note. More positive data was released from the US labor market with a continued decline in the number of initial unemployment claims, noting the US job market continues to improve with increased hiring and fewer dismissals. Will the US economy continue to expand in 2015?

1. US CB Consumer Confidence: Tuesday, 15:00. U.S. consumer confidence declined in November to a five month low of 88.7 after posting 94.5 in October. Consumer’s confidence regarding current-business conditions and short-term outlook dropped considerably. Analysts expected confidence to rise to 95.9. Economists expect consumer sentiment will reach 94.6 in December.
2. US Unemployment Claims: Wednesday, 13:30. The number of new applications for unemployment benefits declined last week to its lowest level since early November, indicating the job market continues to demonstrate strength. Initial jobless claims dropped by 9,000 to a seasonally adjusted 280,000. Economists expected claims to reach 290,000. The less volatile four-week moving average fell 8,500 to 290,250 indicating companies seek to hold on to their workers and hire new ones. The number of weekly claims is expected to reach 287,000 this week.
3. US ISM Manufacturing PMI: Friday, 15:00. The U.S. manufacturing sector lost momentum in November, reaching 58.7 after a 59 points reading in the prior month. Economists expected a lower figure of 57.9. New Orders Index increased to 66, from October’s reading of 65.8; the Production Index reached 64.4%, down from the previous reading of 64.8; and the Employment Index declined to 54.9, compared to the precious reading of 55.5. Lower energy prices gave a boost to the manufacturing sector, increasing consumer’s demand and the continued strength of the Us labor market also contributes to growth. Manufacturing PMI is forested to reach 57.6 this time.

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"The situation in Russia raises concerns within the precious metals market that the central bank might sell its holdings of gold and palladium. The amount of palladium holdings is unknown, but for gold, the Central Bank of Russia is currently the sixth largest holder of the metal at 1,168.7 tonnes, after having built up its gold reserves over the last several years. The CBR's gold holdings make up about 10.2% of total reserves.
...Russia's gold reserves are worth about $45bn around current price levels. To put this into context, the CBR's currency intervention year-to-date has been more than $80bn. Even if the entire gold position was liquidated, it would clearly not be enough to defend the rouble

Although the possibility cannot be ruled out with certainty, we think the risk that Russia will sell its precious metals holdings is probably small."

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