GBP/USD – Weaker UK Construction Could Dent Pound Demand
Demand for the Pound was also limited by a more modest NIESR Gross Domestic Product estimate for the three months to October, which indicated a slight slowing of growth. Market uncertainty stemming from the result of the US election is likely to limit the appeal of Sterling in the near term, though, with a Trump victory potentially raising the odds of a hard Brexit. Hopes are not high for Friday’s UK construction output figures, which could offer evidence of further economic weakness. However, if the domestic housing market shows continued signs of strength then the GBP/USD exchange rate could maintain its recent gains.
USD/GBP – US Dollar Outlook Dominated by Fallout from Presidential Election
The US Dollar saw some volatile movement as the results of the US presidential election became clear, with markets unsettled by the surprise victory of Donald Trump. This shock result was seen to remove the prospect of a December Federal Reserve interest rate hike off the table, prompting investors to sell out of the ‘Greenback’. Political developments are likely to remain the primary driver of USD exchange rates for the foreseeable future, with any indications of Trump’s policy outlook expected to provoke fresh market jitters. If Trump’s tone becomes more inflammatory the US Dollar could come under further pressure.
EUR/USD – Eurozone Political Risk to Weigh on Euro
Thanks to the negative correlation of the EUR/USD exchange rate the Euro benefitted strongly from the initial shock of the US election result. However, the victory of the populist Republic candidate raises the prospect of further political shocks in upcoming Eurozone elections, a prospect that could weigh on the Euro in the days ahead. If speculation continues to point towards the European Central Bank (ECB) extending its quantitative easing program in December then the single currency could return to a more bearish footing.