The results of the US election 2016 will soon be known; GBP USD long-term exchange rate forecasts depend upon who takes control of the White House.
GBP USD Long-Term Exchange Rate Forecasts Depend Upon US Election Victor
The results of today’s US election could markedly alter the trajectory of GBP USD long-term exchange rate forecasts. If Democrat Hillary Clinton clinches victory, markets are likely to see a short relief rally which will undermine the Pound, followed by sustained appreciation ahead of the December Federal Reserve policy meeting.
However, should Trump win, the markets are likely to crash, sending investors fleeing from the US Dollar and riskier commodity assets, as well as stocks. We have already seen this in action; last Friday when the latest FBI news collapsed Clinton’s lead in the polls. The Pound surged as demand for secure assets like UK gilts saw traders needing to convert their cash into Sterling.
A Trump presidency could further strengthen the GBP USD exchange rate due to the weaker chances the Federal Reserve will want to raise interest rates in December. The market volatility is likely to deter the Fed, which will soften the US Dollar further.
However, as the end of the month approaches, markets are likely to pay careful attention to Chancellor Philip Hammond’s first autumn budget statement – the first fiscal policy unveiling since the Brexit vote. Hammond is likely to announce some form of fiscal stimulus, although any signs he has been restrained by weak public finances, as some experts have claimed, are likely to cause GBP USD jitters.
Interbank GBP USD Exchange Rates
At the time of writing, the relative strength indicators (RSI) for the GBP USD exchange rate were trending around 50, suggesting the pairing is trading at ‘natural’ levels. According to the moving average convergence difference (MACD) the short term MA crossed the long term two weeks ago and continues to maintain a gap. This suggests that the outlook of the GBP USD exchange rate is positive, with traders likely to position themselves long on the Pound.
However, given the potential for the US election to disrupt markets, it remains to be seen if such technical indicators will hold sway over GBP USD long-term exchange rate forecasts.
At the time of writing, the interbank GBP USD exchange rate was trading around 1.24, while the interbank USD GBP exchange rate was trending in the region of 0.80.
Comments are closed.