Select Language

Pound Sterling plunges as Trump trades intensify

Breaking news

Pound Sterling plunges as Trump trades intensify

  • X
  • facebook
  • LINE
  • RSS

  • X
  • facebook
  • LINE
  • RSS
New update 2024.11.06 16:36
Pound Sterling plunges as Trump trades intensify

update 2024.11.06 16:36

  • The Pound Sterling plunges against the US Dollar as Trump wins in North Carolina and leads in other swing states.
  • Trump's victory could significantly dent the UK's economic growth.
  • Investors see the Fed and the BoE cutting interest rates by 25 bps on Thursday.

The Pound Sterling (GBP) plummets to near 1.2850 against the US Dollar (USD) in early London trading hours on Wednesday. The GBP/USD pair faces an intense sell-off as investors rush to the so-called 'Trump trades' after various exit polls showed Republican candidate Donald Trump having a clear lead over Democratic rival Kamala Harris in the US presidential election.

According to the Associated Press, Trump has been announced as a winner in key swing state North Carolina and is also leading in the other six swing states: Pennsylvania, Michigan, Georgia, Arizona, Nevada and Wisconsin.

The impact of Trump leading election polls is clearly visible in risk-sensitive currencies, which are significantly down against the US Dollar. Meanwhile, the US Dollar Index (DXY), which gauges the Greenback's value against six major currencies, posts a fresh four-month high at around 105.30.

Risk-perceived currencies have been hit hard as investors expect higher import tariffs in Trump's administration, which will significantly impact exports of United States (US) close trading partners. Trump also promised lower corporate taxes if he wins, which would allow the Federal Reserve (Fed) to maintain a hawkish interest rate guidance.

Apart from the US presidential election, investors will also focus on the Fed's monetary policy meeting, scheduled on Thursday. The Fed is widely anticipated to cut interest rates by 25 basis points (bps) to 4.50%-4.75%. Therefore, investors will pay close attention to the Fed's commentary on interest rate guidance. 

Daily digest market movers: Pound Sterling is sidelined ahead of BoE meeting

  • Except against the US Dollar, the Pound Sterling exhibits a mixed performance compared to its major peers on Wednesday. The British currency is expected to trade sideways, with investors focusing on the Bank of England's (BoE) interest rate decision, which will be announced on Thursday. The BoE is expected to cut interest rates by 25 bps to 4.75%. This would be the second interest rate cut this year. The BoE started its policy-easing cycle with a usual rate cut of 25 bps on August 1.
  • Investors expect the BoE rate cut decision to be a 7-0 vote split, while the other two Monetary Policy Committee (MPC) members are expected to support leaving interest rates unchanged at their current levels.
  • Investors will pay close attention to BoE Governor Andrew Bailey's press conference to know the impact of the United Kingdom (UK) budget for FY2025 on the inflation outlook and the monetary policy action in December. There would also be some questions about the impact of Trump's victory on the UK economy if he wins or remains in the lead by then.
  • According to economists at the National Institute of Economic and Social Research (NIESR), the UK economic growth would be just 0.4% if Trump's tariff plans were implemented. The agency also sees a slower Gross Domestic Product (GDP) growth at 1.2% next year and 1.1% in 2026, even without Trump's tariffs, Reuters reported.

Technical Analysis: Pound Sterling dives to near 200-day EMA

The Pound Sterling dives to an 11-week low near 1.2850 against the US Dollar, which aligns with the 200-day Exponential Moving Average (EMA). The GBP/USD pair faced significant offers after a mean-reversion move to near the 50-day Exponential Moving Average (EMA), which trades around 1.3000.

The Cable has also delivered a Rising Channel breakdown on a daily timeframe, suggesting that a bearish reversal has been triggered.

The 14-day Relative Strength Index (RSI) falls back below 40.00, suggesting that the bearish momentum has resumed.

Looking down, the round-level support of 1.2800 will be a major cushion for Pound Sterling bulls. On the upside, the Cable will face resistance near the psychological figure of 1.3000.

Pound Sterling FAQs

The Pound Sterling (GBP) is the oldest currency in the world (886 AD) and the official currency of the United Kingdom. It is the fourth most traded unit for foreign exchange (FX) in the world, accounting for 12% of all transactions, averaging $630 billion a day, according to 2022 data. Its key trading pairs are GBP/USD, also known as 'Cable', which accounts for 11% of FX, GBP/JPY, or the 'Dragon' as it is known by traders (3%), and EUR/GBP (2%). The Pound Sterling is issued by the Bank of England (BoE).

The single most important factor influencing the value of the Pound Sterling is monetary policy decided by the Bank of England. The BoE bases its decisions on whether it has achieved its primary goal of "price stability" - a steady inflation rate of around 2%. Its primary tool for achieving this is the adjustment of interest rates. When inflation is too high, the BoE will try to rein it in by raising interest rates, making it more expensive for people and businesses to access credit. This is generally positive for GBP, as higher interest rates make the UK a more attractive place for global investors to park their money. When inflation falls too low it is a sign economic growth is slowing. In this scenario, the BoE will consider lowering interest rates to cheapen credit so businesses will borrow more to invest in growth-generating projects.

Data releases gauge the health of the economy and can impact the value of the Pound Sterling. Indicators such as GDP, Manufacturing and Services PMIs, and employment can all influence the direction of the GBP. A strong economy is good for Sterling. Not only does it attract more foreign investment but it may encourage the BoE to put up interest rates, which will directly strengthen GBP. Otherwise, if economic data is weak, the Pound Sterling is likely to fall.

Another significant data release for the Pound Sterling is the Trade Balance. This indicator measures the difference between what a country earns from its exports and what it spends on imports over a given period. If a country produces highly sought-after exports, its currency will benefit purely from the extra demand created from foreign buyers seeking to purchase these goods. Therefore, a positive net Trade Balance strengthens a currency and vice versa for a negative balance.

 


Date

Created

 : 2024.11.06

Update

Last updated

 : 2024.11.06

Related articles


Show more

FXStreet

Financial media

arrow
FXStreet

FXStreet is a forex information website, delivering market analysis and news articles 24/7.
It features a number of articles contributed by well-known analysts, in addition to the ones by its editorial team.
Founded in 2000 by Francesc Riverola, a Spanish economist, it has grown to become a world-renowned information website.

Was this article helpful?

We hope you find this article useful. Any comments or suggestions will be greatly appreciated.  
We are also looking for writers with extensive experience in forex and crypto to join us.

please contact us at [email protected].

Thank you for your feedback.
Thank you for your feedback.

Most viewed

EUR/USD plummets as Trump announces victory in US presidential election

EUR/USD slightly recovers to 1.0750 after nosediving to near 1.0700 in Wednesday's European session, the lowest level in over four months.
New
update2024.11.06 18:18

JPY: House vote to be key - ING

USD/JPY is just over 1% higher today as it reacts to the rise in US yields, ING's FX analyst Chris Turner notes.
New
update2024.11.06 18:12

AUD/USD: A break of the major support at 0.6535 is unlikely - UOB Group

The Australian Dollar (AUD) could further but a break of the major support at 0.6535 is unlikely.
New
update2024.11.06 18:06

AUD/USD rebounds from multi-month low, finds support ahead of 0.6500 mark

The AUD/USD pair trims a part of heavy intraday losses and recovers around 70-75 pips from the vicinity of the 0.6500 psychological mark, or its lowest level since August 8 touched earlier this Wednesday.
New
update2024.11.06 18:00

EUR: Europe braces itself for Trump 2.0 - ING

European politicians will be waking up to face their fears this Wednesday morning.
New
update2024.11.06 18:00

GBP/USD: Can break below 1.2900 - UOB Group

The Pound Sterling (GBP) could trade in a choppy and broad range of 1.2900/1.3040.
New
update2024.11.06 17:45

USD: Trump trades boost the US Dollar - ING

The reaction to the US election so far in the FX market has been, as expected, a strong dollar across the board.
New
update2024.11.06 17:44

Mexican Peso plummets as Trump closes in on victory

The Mexican Peso (MXN) plummets in its most-heavily traded pairs on Wednesday, especially versus the US Dollar (USD), against which it is down over two percent after results from the US presidential election show Republican nominee Donald Trump extremely close to victory.
New
update2024.11.06 17:35

Not only Harris lost, the euro lost as well - Commerzbank

Not only did the US dollar make significant gains last night.
New
update2024.11.06 17:27

GBP/JPY rises above 198.00 as traders expect BoE to deliver a nominal rate cut in November

GBP/JPY extends its gains for the second successive session, trading around 198.30 during the European hours on Wednesday.
New
update2024.11.06 17:18

Disclaimer:arw

All information and content provided on this website is provided for informational purposes only and is not intended to solicit any investment. Although all efforts are made in order to ensure that the information is correct, no guarantee is provided for the accuracy of any content on this website. Any decision made shall be the responsibility of the investor and Myforex does not take any responsibility whatsoever regarding the use of any information provided herein.

The content provided on this website belongs to Myforex and, where stated, the relevant licensors. All rights are reserved by Myforex and the relevant licensors, and no content of this website, whether in full or in part, shall be copied or displayed elsewhere without the explicit written permission of the relevant copyright holder. If you wish to use any part of the content provided on this website, please ensure that you contact Myforex.

  • Facebook
  • Twitter
  • LINE

Myforex uses cookies to improve the convenience and functionality of this website. This website may include cookies not only by us but also by third parties (advertisers, log analysts, etc.) for the purpose of tracking the activities of users. Cookie policy

I agree
share
Share
Cancel