Pound to dollar forecast: GBP/USD set for volatile week
The US dollar is set for a volatile week with the US midterm elections taking place today. The midterm elections will help dictate future US Government policy in the Trump era.
Political uncertainty is a major driver for dollar exchange rates and depending on how many seats the Democrats win or lose could make life trickier for the Trump administration to pursue a number of policies he has pledged. Any major surprises could see considerable volatility for dollar exchange rates tomorrow when the results are delivered. A good result for Trump in my opinion could help strengthen the dollar as it will give him more control to push through his policies.
In terms of global trade, the markets may seek a flight to the safety of the dollar if Trump then plays hardball on trade policy with China.
US jobs growth: Impact on pound to dollar rate
The dollar has also been given a boost after US jobs growth last week arrived better than expected, taking levels to the highest in 9 years. Unemployment also hit 3.7% and President Trump was quick to highlight last week that 250,000 jobs had been created last month which he hopes to utilise to his advantage in these elections today.
Wow! The U.S. added 250,000 Jobs in October – and this was despite the hurricanes. Unemployment at 3.7%. Wages UP! These are incredible numbers. Keep it going, Vote Republican!
— Donald J. Trump (@realDonaldTrump) November 2, 2018
Sterling strength helping pound to dollar rate
The pound to dollar rate has been boosted over the last week with rates for the GBP/USD sitting above 1.30. Much of the strength has stemmed from renewed confidence for a Brexit deal being agreed. This week is key for the British Prime Minister who will be holding a Brexit Cabinet meeting this afternoon. With recent commentary from UK Brexit Secretary Dominic Raab, who suggested he expected a deal to be reached by 21st November, it would suggest Brexit progress is rapidly being made.
However the issue of the Irish backstop has been something of a hot potato this week with a lack of agreement between both sides. Dominic Raab seeks an exit clause from the Irish backstop that could pull Britain out effectively with no deal. However, this has not been received well in Ireland who have insisted this will not be possible. Expect considerable volatility this week for the pound to dollar rate as developments unfold.
Should the proposed EU summit go ahead later this month, if it is deemed sufficient progress has been made then the pound could see a boost against the dollar. Any more talk of a no deal Brexit scenario, which cannot be ruled out, would likely see the pound to dollar rate tumble.
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