GBP/USD Exchange Rate Strengthens on Hopes for Clear Election Result
The Pound to US Dollar (GBP/USD) exchange rate is ticking higher this morning, supported by optimism that today’s US election will deliver a clear result.
At the time of writing the GBP/USD exchange rate is trading at around $1.2993, up roughly 0.5% from today’s opening rate.
Will a Blue Wave Undermine the US Dollar (USD)?
The US Dollar (USD) looks poised to weaken in the coming days as the uncertainty surrounding the US presidential election finally begins to clear.
As the country votes in what might be one of the most divisive election in living memory, most final polls have put Democratic candidate Joe Biden ahead of his Republican rival Donald Trump by around 8 points.
Market are hopeful this lead will help deliver a clear election victory, with investors currently more focused on the prospect of a clear-cut result rather than who will occupy the White House for the next four years.
Jussi Hiljanen, Chief USD & EUR Strategist at SEB bank, suggests:
‘A clear election result would eliminate one of the three current major market concerns: the surging pandemic, election uncertainties and prospects for new fiscal stimulus. A fast and uncontested election result would be positive for stock markets and negative for the US Dollar.’
However there remains a risk that a tight race could see a contested election, the uncertainty over which could drag out for weeks, driving investors toward the safe-haven US Dollar.
Raffi Boyadjian, Investment Analyst at XM, warns:
‘Trump has reportedly threatened to legally challenge the results in some battleground states and a prolonged legal fight is the worst outcome for the markets right now as it would cause political gridlock and delay any agreement on a new fiscal stimulus bill.’
Pound (GBP) Supported by Brexit Optimism
At the same time, the Pound (GBP) is edging higher this morning, with Sterling sentiment being bolstered by hopes for a Brexit deal.
Intensive talks between the UK and EU are ongoing, with the two sides reportedly getting closer to an agreement on their post-Brexit trade relationship, with hopes for a last-minute deal helping to prop up GBP exchange rates.
However, limiting this upside are concerns over the UK’s impending lockdown, with investors fearing the country could be headed for a double-dip recession.
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