Pound US dollar (GBP/USD) exchange rate muted amid UK general election
The pound US dollar (GBP/USD) exchange rate is trapped in a narrow range this morning as the UK heads to the polls and US markets are closed for a national holiday.
At the time of writing, GBP/USD is trading at around $1.2751, virtually unchanged from this morning’s opening levels.
Pound (GBP) quiet as the UK heads to the polls
On UK election day, the pound (GBP) is trading sideways against the majority of its peers as GBP investors await the results.
Kier Starmer’s Labour party is heavily priced in to win a landslide victory today. A forecast by polling company Survation predicts the Labour Party is on course to win 484 of the 650 seats in parliament.
With Starmer’s commitment to fiscal responsibility, a landslide victory could see GBP exchange rates strengthen moving into tomorrow.
A note from Barclays read:
‘Thursday’s general election is this week’s main focus, with most plausible scenarios, according to available opinion polls, catalysing further pound strength in our view.’
However, the election could still throw up some surprises, with a smaller-than-expected majority for Labour potentially infusing some volatility into Sterling.
US dollar (USD) rangebound amid 4 July celebrations
The US dollar (USD) is treading water against the majority of its peers this morning as US markets close for Independence Day.
This leaves the ‘greenback’ to lick yesterday’s wounds, following a plunge in the latest ISM services PMI.
The index fell from a previous reading of 53.8 to 48.8 in June, rather than a more modest forecast of 52.5, and marked the lowest reading in four years.
Furthermore, the latest initial jobless claims applied extra pressure on USD as new unemployment claims remained near a 10-month high.
Commenting on yesterday’s data Derren Nathan, Head of Equity Research at Hargreaves Lansdown, said:
‘In a shortened trading session ahead of today’s 4 July celebrations, investors have been digesting weak jobs data in the US. There was also weak data from the US services sector with the US ISM Services PMI falling 5 points sequentially in June to 48.8, way short of the 52.5 consensus expectation. Perhaps no surprise that 10-year Treasury yields lost 8 basis points to 4.355%.’
GBP/USD exchange rate forecast: UK election results and US data in focus
Looking ahead, the pound US dollar exchange rate could experience some volatility tomorrow as the UK election results are released.
Should a Labour secure a majority, GBP exchange rates could climb, however, should Starmer’s expected majority fail to materialise, the Pound could weaken.
Turning to the US dollar, an expected softening in the latest non-farm payrolls data in June alongside US unemployment levels remaining at an over two-year high will likely see the US dollar close the week on the back foot.
Should an expected downturn in the upcoming non-farm payrolls data stoke Federal Reserve interest rate cut bets, this could dent USD further.