Pound US dollar (GBP/USD) exchange rate in freefall amid US election
The pound US dollar (GBP/USD) exchange rate has collapsed this morning amid the final stages of the US election.
At the time of writing, GBP/USD is trading at around $1.2911, down over 1% from this morning’s opening levels.
US dollar (USD) soars as Trump declares victory
The US dollar (USD) has skyrocketed against almost all its peers this morning and reached multi-month highs against several of its counterparts as the American currency is being heavily bolstered by the prospect of a Donald Trump presidency.
Currently, Trump is in the lead with 267 electoral votes compared to Vice President Kamala Harris’ 224.
This puts Trump just three electoral votes shy of the 270 required to secure the presidency, with Trump also on the track to secure both the house and senate.
This has seen USD exchange rates rally today, bolstered by ‘Trump trade’, with markets betting that his economic policies will prove inflationary and encourage the Federal Reserve to leave interest rates higher for longer.
Matthew Ryan, Head of Market Strategy at Global Financial Services firm Ebury, comments:
‘The US dollar is trading higher against almost every currency in the world overnight on the news of the big outperformance in the polls from Donald Trump. Not only are markets positioning themselves for a comfortable Trump victory in the electoral college, but the prospect of a Republican controlled Congress, which is key in determining the ability of the incoming president to force policy changes through the US government.’
Pound (GBP) slumps thanks to US election
The pound (GBP) is weakening against the majority of its peers this morning as the British currency is being undermined by the high likelihood of a Trump victory.
As the US election rages on, GBP exchange rates are being significantly hobbled by the view shared by some analysts that a Donald Trump victory would be bad for the UK economy.
Ahmet Kaya, a NIESR economist, explains:
‘The UK is a small, open economy and would be one of the countries most affected.’
This has seen Sterling sentiment lose ground against its counterparts today, further undermined by a thin UK trading conditions.
GBP/USD exchange rate forecast: central bank decisions in the spotlight
Looking ahead to tomorrow, the primary driver of movement for the pound US dollar exchange rate is anticipated to be the latest interest rate decisions from both the Bank of England (BoE) and the Federal Reserve.
Market consensus points to a 25-basis point rate cut from both central banks, which would lower their respective rates from 5% to 4.75%.
However, speculation of a potential 50-basis point cut by the Fed could put downward pressure on the US Dollar should the central bank in fact enact another oversized cut.
Turning to the pound, with markets already pricing in a 25-bps cut, investors will be closely examining the BoE’s forward guidance for any clues about future monetary policy.
Any hints that a December rate cut may be on the table could dampen Sterling sentiment through the latter stages of this week.