Pound to Dollar Exchange Rate Slumps 1% as Trump Victory Sparks Market Moves

November 7, 2024 - Written by David Woodsmith

STORY LINK Pound to Dollar Exchange Rate Slumps 1% as Trump Victory Sparks Market Moves

The Pound US Dollar (GBP/USD) exchange rate slumped on Wednesday as the US presidential election results pointed to a victory for Trump.

At the time of writing, GBP/USD traded at around $1.2896, down more than 1% since the start of the day’s session.

The US Dollar (USD) surged on Wednesday as the US presidential election results indicated a win for former president Donald Trump.

A Trump victory is viewed favourably for the 'Greenback' due to his promises of tax cuts and protectionist trade policies, which could stimulate the US economy and increase inflation in the short term.

Consequently, this scenario suggests that US interest rates may stay higher for a longer period. In response, investors flocked to the US Dollar on Wednesday.

Meanwhile, the Pound (GBP) weakened as Trump's probable victory sparked worries among UK investors.

Trump's proposed tariffs could hamper UK growth and drive up prices, a troubling scenario for the already fragile British economy.

Furthermore, there are concerns that a tense relationship between Trump and the governing Labour Party could cause political friction in the years ahead.

Consequently, Sterling faltered against numerous currencies on Wednesday.

GBP/USD Exchange Rate Forecast: Central Bank Decisions to Take Centre Stage?

Looking ahead, the US election could keep driving GBP/USD movements as results continue to roll in. If Republicans retain control of the House of Representatives, the US Dollar could see another boost.

As the dust settles, investors may shift their focus to the upcoming interest rate decisions from the Bank of England (BoE) and the Federal Reserve on Thursday.

With both central banks anticipated to cut rates by 25 basis points, the spotlight will be on their forward guidance. Policymakers on both sides of the Atlantic may be cautious about committing to future cuts, given the potentially inflationary impacts of the UK’s Autumn Budget and Donald Trump’s election victory.

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TAGS: Pound Dollar Forecasts