Sterling lost around two cents against the U.S dollar last night as FED Chairman Ben Bernanke told a press conference that the Federal Reserves current asset purchasing programme could soon be reduced. Throughout trading yesterday GBP/USD exchange rates were hovering around $1.5650 but as Mr Bernanke delivered his thoughts the dollar gained strength to bring the mid-market price back down to $1.5450, the lowest we have seen the cross the 6th June. For more information on live rates of exchange click here
The U.S Federal Reserve is currently pumping $85bn (£54bn) a month in to the economy by purchasing government bonds in an attempt to lower interest rates and increasing spending, Since the asset purchasing began the U.S dollar has suffered which has seen a rise in exchange rates for the pound and euro.
Yesterdays speech by Mr Bernanke gave us an insight into the FED's future plans and having said that the economic outlook in the U.S is improving the FED could look to cut back on the amount of asset purchases over the next six months with a view to ending the programme by the middle of 2014.
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As with anything we will have to wait and see if this actually happens and Mr Bernanke was keen to stress that an end to the programme will only happen if the U.S economy continues to improve. If and when we see a reduction another drop in exchange rates could be possible, as I have said before a number of the forecasts I receive are still indicating we will see Sterling-dollar fall to $1.47 in the next three months.
In the UK all eyes seem to be on the Bank of England, with Sir Mervyn King stepping down at the end of the month and Mark Carney due to take over as the head of the central bank, the general feeling seems to be that Mr Carney will look to reduce the pounds value which would prompt a drop in exchange rates across the board.
The difficulty Mr Carney will face is trying to persuade the other eight MPC members, something that Mervyn King has failed to do over the last few months. Yesterday's release of the BoE minutes once again showed the Mr King has voted in favour of more Quantitative Easing but with six policy makers voting against increasing the current level of QE, Mr Carney may have his work cut out.
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