Where Next for the Pound Following the US Election?

The pound has experienced a tricky week with the US election failing to establish a winner and sterling remaining at the mercy of sentiments on Brexit, COVID-19 and also the Bank of England (BoE).

Like pretty much everything in our lives at the moment, little is straightforward for the pound with so much for the currency markets to consider and to also wait upon before allowing investors to make a decision.

The US election is at the time of writing still in the balance and whilst Biden appears the likely victor needing only 6 more electoral votes according to the Financial times, it is mathematically possible for Trump to win.

Trump is garnering lots of attention however with his claims of election fraud and this is proving a testing time for the currency market and also politics. There are two ways this election can influence sterling, in an economic and also a political manner.

The economics is that as the US dollar rises and falls, sterling can move higher and lower too against other currencies. So, where the US dollar has weakened and GBPUSD levels have risen, that can cause the pound to rise against other currencies.

And the flipside is true too, where the falling GBPUSD rate (from dollar strength) causes the pound to fall against other currencies as the strengthening dollar drags the pound down all around.

The political effect is how a Biden or Trump Presidency could influence the sentiment on Brexit and other issues which are relatable to the strength of the pound and the British economic outlook. For example, Biden has been less supportive of Boris Johnson and his Brexit plans, which could make it harder for the UK to get a trade deal than under Trump.

This kind of sentiment has weakened the pound previously and is definitely a topic for us to be conscious of moving forward for the pound. It has been said a Trump win will be more supportive for the UK since Trump has been a vocal supporter of Brexit and was keen to finalise a trade deal with the UK.

The currency market could react quite sharply any moment to any sudden developments so if you have any currency transfers to consider, you can register your interest with us and we can monitor the levels for you and provide updates as the news develops.

What Happens next on Brexit?

The next dates being discussed regarding Brexit are more talks next week where Barnier will liaise with the UK to try and resolve some of the outstanding issues. There is also an EU Summit towards the end of the month which might also form some basis of a deal.

The bottom line is that at the moment there is no agreement, and the deadline is coming up for December 31st. As the clock ticks down so too does the pressure and potential for a no-deal exit which might see the pound losing value.

Whilst December 31st is the deadline, we need to perhaps agree something sooner since there needs to be time for both sides to ratify the deal in the national parliaments. The Financial Times reports this as needing to happen in ‘mid-November’ which clearly doesn’t leave much time at all.

The pound has typically strengthened on signs of a deal to be reached and there had been plenty of optimism in recent weeks at the possibility of a deal to be agreed. As the pressure intensifies, the potential for further movements could rise, providing us with some busier times for the pound potentially just around the corner.

With COVID-19 lockdowns still ensuing in the UK and across Europe, there continues to be a continuation of the themes of recent months with an uncertain economic outlook troubling markets. With both the British and European central banks all either considering or deciding upon further monetary measures to support the economy, there could be more volatility ahead.

For any clients looking to buy or sell the pound, there could be some bigger moves just around the corner as we learn of the latest news on Brexit, COVID-19, the US election and the British and global economy. If you have a transfer to consider why not make us aware so our expert team can monitor the rates for you and also alert you to sudden changes and developments, to help you make an informed decision.

Coronavirus has made the currency markets even more unpredictable and volatile in many respects, and we can help share with you the latest news and provide tools to help provide you make an informed decision and strategy on your transfer.

I would like to assure all our readers we remain very much operational to assist with any international money transfers throughout this time. If you would like to discuss the markets in more detail, please do contact me directly using the form below.

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