Pound Sterling Climbs vs Euro, Dollar Despite Trump Assassination Attempt

July 16, 2024 - Written by David Woodsmith

STORY LINK Pound Sterling Climbs vs Euro, Dollar Despite Trump Assassination Attempt

The Pound has maintained a robust tone in global markets with the Pound to Dollar (GBP/USD) exchange rate hitting 11-month highs just below the crucial 1.3000 level.

US politics and UK inflation data will be very important elements this week.

There has been no major reaction to the assassination attempt on former President Trump over the weekend with traders able to take a measured stance given that it occurred when markets were closed.

The dollar briefly gained before losing ground as traders focussed on the potential for a September Fed rate cut.

The consensus, however, is that the attack has further boosted the chances of a Trump victory in November, especially given iconic imagery, and this will tend to underpin the dollar over the next few weeks.

Vishnu Varathan, chief economist for Asia ex-Japan at Mizuho Bank commented; "A bias for a supported, possibly even stronger, USD is likely to play out if the U.S. heads into Trump 2.0."

He added; "This is admittedly more from other major currencies being undermined from a conspiracy of antagonistic U.S. trade and geo-political posturing rather than undisputed allure of USD."

As far as the Bank of England is concerned, there was further dovish rhetoric from Bank of England MPC member Dhingra who stated that demand is too soft for inflation to rise sharply.

She also stated that now is the time to start normalising interest rates so that the squeeze on living standards can stop.

There is, therefore, very little doubt that Dhingra will again vote for an interest rate cut at the August 1st policy meeting.

There have, however, been further doubts whether the majority will back a cut.

In this context, UK inflation data could be pivotal in determining whether GBP/USD can secure a sustained break above 1.30.

According to MUFG; “We are still holding on to our call for an August rate cut, but another upside surprise for services inflation and/or wages would challenge our view and encourage a further strengthening of the GBP in the week ahead.”

ING sees near-term Pound support before selling resumes; “There are no strong reasons to expect a major loss of momentum for the pound this week, unless CPI data surprises on the downside. Our call remains for an August cut, also considering the pressure from rising Fed cut bets, so we expect weakness in the pound to emerge in a couple of weeks’ time.”

Rightmove recorded a 0.4% decline in house prices for July, with a 0.4% annual increase.

Tim Bannister, Rightmove’s director of property science, was relatively positive on the outlook; "A first Base Rate cut for over four years, together with the new political certainty, could set the scene for a positive autumn market, with improved affordability and a more confident outlook in the second half of the year."

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TAGS: Pound Sterling Forecasts