Pound to Dollar Week Ahead Forecast: Trump trades dominate GBPUSD

November 10, 2024 - Written by Frank Davies

STORY LINK Pound to Dollar Week Ahead Forecast: Trump trades dominate GBPUSD

ING has upgraded its dollar forecasts following the US Presidential election and now has an end-2025 Pound to Dollar (GBP/USD) exchange rate forecast of 1.24.

MUFG added; “the bullish implications for the US dollar from a Trump victory and likely Red Sweep will cap further upside for cable beyond the 1.3000-level.”

According to ING; “A Trump win is clearly bullish for the dollar – but the challenge will be in timing it.”

There was a high degree of uncertainty ahead of the US Presidential election, although betting markets had indicated a Trump victory.

In the event, Trump secured a convincing victory in the electoral college and won the popular vote.

The Republicans have also regained control of the Senate and, while there are still some House of Representatives elections to declare, a small Republican victory the most likely outcome which would give the party a clean sweep.

GBP/USD hit 11-week lows below 1.2850 after the US election and hit selling above 1.30.

According to ING; “President-elect Trump’s overwhelming mandate for looser fiscal policy plus universal protectionism should drag the dollar higher over a multi-year period.”

It added; “we pencil in peak dollar strength for something like late 2025/early 2026, when Trump’s new administration is firing up tariffs at a time of high US bond yields.”

MUFG takes a similar view; “President-elect Trump won a very strong mandate to deliver the policies he campaigned on and that will encourage him to act on trade tariffs, deportations of illegal immigrants and to extend this tax cuts and increase fiscal spending. The extent of these policies will remain unclear for some time but investors will likely position for quick implementation that will support yields and lift the US dollar.”

As far as economics is concerned, the Federal Reserve cut interest rates by 25 basis points to 4.75% which was in line with consensus forecasts.

Fed Chair Powell played down the slightly disappointing recent inflation data and indicated that there would be further gradual rate cuts.

J.P. Morgan expects a further rate cut in December, but added; "For 2025, however, the picture will be complicated by potential for trade and tax policies to add to the inflation outlook. The U.S. central bank's rate trajectory has been clouded by Trump's election victory as his plans for hefty tariffs are seen as stoking inflation.”

The Bank of England also cut interest rates by 25 basis points to 4.75% which was in line with market expectations.

The bank statement was relatively cautious over the outlook for further interest rate cuts, especially with some concerns that the budget measures would put some upward pressure on inflation.

The UK 10-year bond yield hit a 12-month high near 4.55% during the week before a retreat to near 4.45%.

According to Danske Bank; “the BoE delivered a hawkish twist to its guidance emphasising their gradual approach to reducing the restrictiveness of monetary policy. We think this supports our base case of the next cut coming in February.”

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TAGS: Currency Predictions Pound Dollar Forecasts