Pound US Dollar Exchange Rate Rises amid US Election Jitters

November 4, 2024 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate Rises amid US Election Jitters

The Pound to US Dollar (GBP/USD) exchange rate got off to a positive start this week as USD investors turned cautious ahead of the US presidential election.

At the time of writing, GBP/USD was trading around $1.2962, up approximately 0.3% from Monday’s opening levels.

The US Dollar (USD) softened on Monday, with USD investors appearing increasingly anxious as the US presidential election approached.

Much of this caution seems tied to waning confidence in a Donald Trump victory after a closely watched poll suggested that Kamala Harris is leading in the traditionally Republican state of Iowa.

A Harris win is perceived as a potential risk to the US Dollar as Trump’s economic policies are forecast to raise inflationary pressures and could lead the Federal Reserve to delay further interest rate cuts.

The Pound (GBP) traded in a narrow range on Monday as markets digested the previous week’s budget announcement

Chancellor Rachel Reeves first Autumn Budget proved a source of volatility last week, with concerns over tax hikes and government borrowing unsettling GBP investors and gilt markets.

However, Sterling has since stabilised as it became clear these were market spasms and not the full convulsions we saw in the wake of the disastrous 2022 mini-budget crisis.

The Pound to US Dollar exchange rate will likely remain highly sensitive to US election news in the coming days.

Although polls close on Tuesday, delays due to mail-in ballots and potential disputes could postpone the final result until later in the week, potentially creating additional volatility for the US Dollar and overshadowing the Fed’s rate decision on Thursday.

Meanwhile, the Pound may see limited movement in the first part of the week as GBP investors await the Bank of England’s upcoming rate decision.

While a rate cut is anticipated, any hints of further cuts in December could dampen Sterling sentiment.

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