Pound and Euro JUMP 1.24% Against US Dollar on Trump's Return to White House

January 20, 2025 - Written by Frank Davies

STORY LINK Pound and Euro JUMP 1.24% Against US Dollar on Trump's Return to White House

The Pound to Dollar (GBP/USD) and Euro to Dollar (EUR/USD) exchange rates rallied on Monday evening, jumping to 1.23264 and 1.04127, respectively.

Both currency pairs were up at least 1.2% at that time of publishing.

The GBP/USD exchange rate had traded erratically on Monday morning as markets braced for Donald Trump’s inauguration later in the day.

The US Dollar (USD) experienced a mixed start to the week as some investors opted to lock in profits ahead of Donald Trump’s return to the White House.

Since Trump’s victory in the 2024 US presidential election, the Greenback has seen significant gains, bolstered by expectations that his fiscal and trade policies will stoke inflationary pressures.

This, in turn, has fuelled bets that the Federal Reserve will maintain higher interest rates for an extended period.

On his first day back in office, Trump is expected to issue a wave of executive orders. Among these are anticipated measures to impose tariffs on imports from China and some US allies, which has sparked concern among market participants.

These tariff plans are likely to underpin the US Dollar, reflecting its safe-haven appeal amid heightened trade uncertainty.

The Pound (GBP) faced renewed selling pressure at the start of the week as speculation grew that the Bank of England (BoE) will announce an interest rate cut at its next meeting in February.

While the prospect of rate cuts provided some stability to Sterling last week following volatility in the UK bond market, conditions have since normalised, leaving GBP exposed to renewed weakness.

Additionally, investor sentiment remains fragile amid concerns over the UK’s fiscal health. Reports suggest that Chancellor Rachel Reeves may be preparing to unveil sweeping spending cuts in her upcoming spending review, which could weigh further on the Pound.

GBP/USD Forecast: UK Labour Market Report to Drive Movement?

Tuesday’s session is set to bring volatility to the Pound US Dollar exchange rate with the release of the UK’s latest jobs data.

Unemployment is forecast to have risen in November, but at the same time, wage growth is expected to have accelerated.

This mixed data could create uncertainty about the BoE’s next move, potentially leaving GBP investors divided on whether a February rate cut is imminent.

Meanwhile, USD investors are likely to remain focused on Trump’s first full day in office, with his initial policy decisions and priorities expected to set the tone for market sentiment.

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TAGS: Forecasts