US Election Hopes Push Pound to US Dollar (GBP/USD) Exchange Rate to Fortnight Best

Pound to US Dollar Exchange Rate Trending Strongly on Biden Bets

Rising signs that Democrat Joe Biden will win the US 2020 Presidential Election are pushing the Pound Sterling to US Dollar (GBP/USD) exchange rate higher. Uncertainty persists, but unless there is a shift in expectations the pair could climb even higher.

After opening this week at the interbank level of 1.29, GBP/USD briefly edged lower but has since been trending higher.

Market safe haven demand in the middle of the week caused a GBP/USD dip, but the pair is currently surging again. At the time of writing on Friday, GBP/USD is trending near a fortnight best of 1.31, around two cents above the week’s opening levels.

US Non-Farm Payroll data due later could cause some late-week Pound to US Dollar exchange rate movement. Overall though, the results of the US election will likely remain in focus as votes continue to trickle in.

Pound (GBP) Exchange Rates Higher despite Dovish Bank of England (BoE)

The Pound (GBP) has been one of the weaker major currencies this week, but it has still gained on the US Dollar (USD). This has been due to rising risk-sentiment as markets bet on the outcome of the US 2020 Presidential Election.

GBP/USD may have climbed even higher overnight if not for yesterday’s UK news. Not only did Britain return into national lockdown, but the Bank of England (BoE) took a dovish tone in its November policy decision.

In reaction to Britain’s new lockdown, the BoE ramped up quantitative easing (QE). On top of this, the bank lowered its UK forecasts, and speculation returned that the bank may be pressured into using negative interest rates.

For Sterling, Brexit is likely to return to focus as the fate of a UK-EU deal hangs in the balance this month. According to Kit Juckes, Macro Strategist at Societe Generale:

‘It increasingly looks as though negative rates will only be seen if there is no (Brexit) trade deal – not even a poor-quality one,’

US Dollar (USD) Exchange Rates Tumbling as Safe Haven Bets Soften

The US Dollar (USD) continues to slide today, as markets become gradually more confident that the US 2020 Presidential Election will see a clear result.

In the middle of the week, a tighter than expected US Election caused investors to rush to safe havens. This led to a surge in demand for the US Dollar, which briefly pushed GBP/USD lower.

However, Democrat challenger Joe Biden’s advantage is gaining as mail ballots continue to be counted. Many of these ballots were sent by Democrat supporters, as the party had advised mailing votes to avoid risk of the coronavirus Covid19.

This is making the US Dollar shed some of its recent strength.

Last night’s Federal Reserve policy decision actually did little to influence the US Dollar. The Fed kept monetary policy frozen and left its signals largely unchanged.

Pound to US Dollar (GBP/USD) Exchange Rate More Focused on US Election than US NFP

Today’s American session sees the publication of the latest US Non-Farm Payroll report. Typically a highly influential report, there is a chance it could be overshadowed by ongoing developments in the US 2020 Presidential Election.

Votes continue to be counted. While all votes were sent before or on election day, there has been delays in some votes being counted due to the coronavirus pandemic and mail speeds.

Analysts speculate that Democrat Joe Biden could win the election based on current patterns in voting. However, the race remains tight for the time being so markets will continue to closely watch results.

GBP/USD will rise in the event of a clear Biden win, as markets will be more willing to take risks. On the other hand, if President Donald Trump challenges the result, there are fears that recounts and potential civil unrest could lead to further uncertainty.

As for Sterling (GBP), the focus for the British currency is likely to shift to Brexit if US politics calm at all.

If bets of a UK-EU Brexit deal rise, the Pound to US Dollar (GBP/USD) exchange rate is likely to see even further gains.

Josh Jeffery

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