Pound to Euro Rate Jumps on President Trump Win, USD Rallies, EUR Pressured

November 6, 2024 - Written by Frank Davies

STORY LINK Pound to Euro Rate Jumps on President Trump Win, USD Rallies, EUR Pressured

US Ddollar gains to some extent.

The Pound to Dollar (GBP/USD) exchange rate dipped to just below 1.2850 before regaining the 1.2900 level.

The Euro has been hit harder than the Pound due to fears over a more aggressive trade policy and damage to the Euro-Zone economy.

In this context, the Pound to Euro (GBP/EUR) exchange rate has strengthened to 1.2000.

According to ING; “Given the UK economy’s smaller exposure to trade than the eurozone and some recently announced fiscal stimulus in the UK, EUR/GBP looks likely to press support at 0.8300 and looks biased to 0.8200 now.”

This would represent gains to 1.22 for GBP/EUR.

Former President Trump has secured re-election with victory in at least six of the key battleground states and is also on course to win the popular vote.

The Republicans will also gain control of the Senate while the House outcome is still uncertain.

Control of the House will be very important for the US agenda.

In this context, ING considers that the House result will be very important for all asset classes.

ING commented; “with the Senate already been called for the Republicans, the base case for financial markets is currently a red clean sweep. Still, the House race remains a very close one, and the Congress split is likely to have deep implications for risk sentiment and the dollar.”

According to MUFG; “Of course there are different kinds of clean sweeps and only a marginal majority could be seen as a potential curtailment of some of Trump’s fiscal policies with the potential for moderate Republicans to block big spending policies.”

MUFG commented; “We indicated in our FX Outlook in October and November that a Trump victory would lead to a potential 7-8% stronger US dollar relative to the forecasts if Harris won.”

It expects EUR/USD will trade below 1.05, undermining GBP/USD support.

Markets will be looking at the European context, especially given expectations of a tougher trade policy from a second Trump administration.

Commerzbank also expects the single currency to come under pressure; “The euro area is likely to suffer disproportionately from a restrictive US trade policy. Not only because of its direct exports to the US. Should the US not remain the ultimate sink of global trade flows (or only in terms of trade that are more favorable for the US than before), global trade as a whole may suffer. This will affect the export nations. And quite a few of them are in the euro area. Germany, for example.”

Danske Bank expects the economy will be a near-term focus; “Regardless of the final election outcome, economic fundamentals will likely resume as the primary market driver until there is greater clarity on the winner's policies, particularly regarding trade and fiscal policy.”

Foreign Exchange Rate Winners and Losers:

Pound to Euro exchange rate (GBP/EUR) is 1.1995 (+0.56%)
Pound to Dollar exchange rate (GBP/USD) is 1.28936 (-1.14%)
Euro to Dollar exchange rate (EUR/USD) is 1.07491 (-1.69%)

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TAGS: Pound Euro Forecasts