Pound US dollar (GBP/USD) exchange rate falls amid risk aversion
(Updated 15:00, 23/10/24) The pound US dollar (GBP/USD) exchange rate fell to a fresh two-month low this afternoon as a risk-off mood sweeps markets and investors bet on a Donald Trump victory in next month’s US presidential election.
After wobbling earlier in the session, the increasingly risk-sensitive pound (GBP) has finally succumbed to the gloomy market mood, which is also boosting the safe-haven US dollar (USD).
The deterioration in risk appetite is partially tied to Israeli airstrikes on the Unesco-listed city of Tyre in Lebanon. The attack represents another escalation of the Middle East conflict, with Israel expanding its offensive.
In addition, ‘Trump trade’ continues to impact markets. Investors believe an expected Trump victory will lead to higher US inflation and slower global growth, due to the former president’s protectionist policies. This is both boosting the US dollar and souring the market mood.
At the time of writing, GBP/USD is trading at $1.2950, down 0.2% on the day but slightly above an earlier two-month low of $1.2944.
Original article continues below:
Pound US dollar (GBP/USD) exchange rate wobbles as markets bet on Trump victory
The pound US dollar (GBP/USD) exchange rate is wavering this morning, with the pairing hovering just above a two-month low struck yesterday, as market expectations of a Donald Trump victory in next month’s US presidential election support the American currency.
At the time of writing, GBP/USD is trading at $1.2984, virtually unchanged from its opening level.
US dollar (USD) strong amid bets on second term for Trump
The US dollar (USD) is gaining ground today – although its recent upside has been bumpy – as ‘Trump trade’ lifts the currency.
Market odds that Donald Trump will win a second term as president next year have risen above 60% in recent days, with investor bets on a Trump victory boosting the US dollar.
Analysts believe that Trump’s protectionist policies and tax cuts could push up domestic inflation, which in turn would likely make it harder for the Federal Reserve to lower interest rates.
Proposed tariffs from Trump could also slow the global economy, with these fears weighing on market risk appetite and supporting the safe-haven ‘greenback’.
Pound (GBP) resists losses despite budget concerns
Meanwhile, the pound (GBP) is managing to hold its ground today and resist steeper losses, despite ongoing concerns about the upcoming UK Autumn Budget.
Yesterday, fears of tax hikes and spending cuts in the budget put pressure on the pound, but GBP is so far avoiding further losses today.
Lloyds Banking Group has today downplayed concerns of coming tax hikes, arguing that Labour’s key aim of boosting growth is the most important thing to focus on.
Chief Financial Officer William Chalmers commented:
‘Whatever the tax changes might be, we believe that they will be pursued in the context of a constructive, pro-growth agenda. And it’s that overall balance that we’re really looking for, and indeed it’s that overall balance, that pro-growth agenda, that we would seek to be a part of going forward.’
GBP/USD exchange rate forecast: BoE’s Bailey and Fed policymakers in focus
Looking ahead, two Federal Reserve officials and Bank of England (BoE) Governor Andrew Bailey are due to speak later today, with any comments on monetary policy potentially impacting the GBP/USD pairing.
From the Fed, we have Michelle Bowman in the afternoon and Thomas Barkin in the evening. Both rate-setters are among the most hawkish on the Fed’s board, so their remarks could potentially boost the US dollar.
BoE Governor Bailey then takes the stage later in the evening. If he indicates that the recent cooler-than-forecast UK inflation could prompt the BoE to adopt a more ‘aggressive’ approach to interest rate cuts then Sterling could slide.