Exchange Rate Forecasts Latest: Pound Sterling Targets 1.7035 Suggest OCBC Bank

The latest G7 exchange rate forecasts, courtesy of Emmanuel Ng at OCBC Bank, suggest the pound sterling (GBP) could yet advance further against the US dollar.

Euro dollar forecast

The EUR-USD may continue to remain moored around the 1.3800 neighbourhood amid the overhang from the ECB’s jawboning capping the upside for the pair in the near term. Resistance is expected at the recent highs near 1.3900 while the 55-day MA (1.3757) may cushion on dips.

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Dollar Yen exchange rate forecast

USD-JPY Elsewhere, USD-JPY was also given a slightly lift on the back of the higher N225 after Finance Minister Aso indicated that moves by
the GPIF in local stocks would become apparent from June onwards.

Markets will be looking towards further comments and cues from the BOJ’s Kuroda later today (with his early comments not deviating from the script) with firmer UST yields from overnight likely to keep the pair supported in the interim.

Note however that any failure to successfully challenge the Ichimoku cloud circa 102.50 and the 55-day MA (102.30) may instead see a retreat be below 102.00.

Aus dollar / US dollar forecast

Despite the slight pickup in risk appetite on Wednesday, note that the AUD-USD is still contemplating the 0.9400 ceiling with 0.9460 expected to cap thereafter while support is seen on dips into 0.9300.

On the event horizon, the Australian 1Q CPI numbers due next Wednesday may prove pivotal for any potential upside head room, China/risk appetite headlines permitting.

Pound sterling / dollar exchange rate forecast

We retain our multi-session upside objective of 1.7035 for the GBP-USD with markets also looking to attach more hawkish intentions to the BOE once again.

On this front, look towards BOE MPC minutes due next Wednesday for further cues. In the interim, key psychological support may materialise at 1.6700.

Markets: Stoxx600 tech index under pressure

Equity markets trading on the soft side Thursday, pausing for breath following the previous session’s sharp gains with investors gearing up for another raft of high profile US earnings later from the likes of Goldman Sachs, Morgan Stanley, PepsiCo and GE.

Poor numbers out of Bank of America and Credit Suisse on Wednesday reaffirmed the continuing deterioration in fixed income and trading divisions for heavyweight global investment banking giants.

Commenting on the equity markets is Ishaq Siddiqi at ETX Capital:

"No doubt, today’s releases from both GS and MS will be closely scrutinised by investors who will pick apart the earnings to get a read of the health of the US banking sector.

"Expect ongoing pressure in the bank sector with market participants likely to punish banks which are failing to restructure, deleverage appropriately to churn profitability and more importantly, are unable to settle litigation issues swiftly.
 
"Staying on earnings, Stoxx600 tech index under pressure following poor earnings from Google and IBM with both shares in both companies sliding in after-hours trading in New York.

"Google reported Q1 revenues missed expectations while IBM suffered more than 20% drop in net income during the period on the back of huge restructuring costs.

"These numbers will only serve to exacerbate the ongoing rout in the tech sector on the back of bloated valuations for some large-cap tech names such as Facebook, Amazon and Netflix."