Pound Sterling Plummets as Trump Leads in Key Swing States
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The Pound Sterling (GBP) sharply declines against the US Dollar (USD) as Trump gains ground in pivotal U.S. swing states, driving investors toward “Trump trades.” This shift could dampen UK economic growth, with the National Institute of Economic and Social Research (NIESR) projecting a 0.4% growth if Trump’s tariff policies are enacted. As investors focus on Thursday’s rate decisions by the Federal Reserve (Fed) and the Bank of England (BoE), GBP/USD faces significant downside risk.
Pound Sterling Under Pressure as Trump’s Election Lead Triggers Market Shifts
Early Wednesday trading saw the Pound Sterling plunge to 1.2850 against the US Dollar, as rising odds of a Trump victory lead investors to position for higher tariffs and a more pro-U.S. economic stance. This is especially notable in risk-sensitive currencies, including the GBP, which faces heavy selling pressure as Trump’s lead is confirmed in swing state North Carolina, with additional traction in other key states like Pennsylvania, Michigan, and Arizona.
Trump’s Economic Policy Impact on the Pound
Trump’s tariff-focused agenda promises to significantly impact U.S. trade partners, including the UK. According to projections by the NIESR, UK economic growth could slow to 0.4% if Trump’s tariffs materialize. Even without these tariffs, GDP growth is forecast at a modest 1.2% in 2025 and 1.1% in 2026, highlighting the potential impact of a pro-U.S. protectionist stance.
Additionally, Trump has vowed to reduce corporate taxes, a move that could add inflationary pressures to the U.S. economy, potentially prompting the Fed to uphold its hawkish interest rate guidance. This stance could further strengthen the USD, deepening the challenges for the GBP in the near term.
Focus on Upcoming Fed and BoE Rate Cuts
The U.S. presidential election isn’t the only driver of market action this week. On Thursday, both the Fed and the BoE are expected to announce 25 basis point rate cuts, with investors keenly awaiting each central bank’s forward guidance. The Fed is anticipated to bring its benchmark rate down to a range of 4.50%-4.75%, the second consecutive rate cut after the 50 bps reduction in September. Likewise, the BoE is expected to reduce its rate to 4.75%, representing a continuation of its policy easing that began in August with a 25 bps cut.
Technical Analysis: GBP/USD Breakdown and Key Levels
On the technical front, GBP/USD recently dipped to an 11-week low near the 200-day Exponential Moving Average (EMA) at 1.2850, following a breakdown of the Rising Channel on the daily chart. This pattern break signals a bearish reversal, with the 14-day Relative Strength Index (RSI) falling below 40, confirming renewed bearish momentum.
Key levels to watch include: Support: Major round-level support at 1.2800, which could provide a cushion for GBP bulls in the short term. Resistance: Upside resistance around the psychological level of 1.3000, also near the 50-day EMA, which may act as a key barrier for any potential recovery.
Outlook With Trump’s current lead, the Pound Sterling remains vulnerable to further downside. Investors should keep an eye on evolving U.S. election results and central bank policy stances, both of which will likely shape GBP/USD direction for the rest of the week.
Pound Sterling Under Pressure as Trump’s Election Lead Triggers Market Shifts
Early Wednesday trading saw the Pound Sterling plunge to 1.2850 against the US Dollar, as rising odds of a Trump victory lead investors to position for higher tariffs and a more pro-U.S. economic stance. This is especially notable in risk-sensitive currencies, including the GBP, which faces heavy selling pressure as Trump’s lead is confirmed in swing state North Carolina, with additional traction in other key states like Pennsylvania, Michigan, and Arizona.
Trump’s Economic Policy Impact on the Pound
Trump’s tariff-focused agenda promises to significantly impact U.S. trade partners, including the UK. According to projections by the NIESR, UK economic growth could slow to 0.4% if Trump’s tariffs materialize. Even without these tariffs, GDP growth is forecast at a modest 1.2% in 2025 and 1.1% in 2026, highlighting the potential impact of a pro-U.S. protectionist stance.
Additionally, Trump has vowed to reduce corporate taxes, a move that could add inflationary pressures to the U.S. economy, potentially prompting the Fed to uphold its hawkish interest rate guidance. This stance could further strengthen the USD, deepening the challenges for the GBP in the near term.
Focus on Upcoming Fed and BoE Rate Cuts
The U.S. presidential election isn’t the only driver of market action this week. On Thursday, both the Fed and the BoE are expected to announce 25 basis point rate cuts, with investors keenly awaiting each central bank’s forward guidance. The Fed is anticipated to bring its benchmark rate down to a range of 4.50%-4.75%, the second consecutive rate cut after the 50 bps reduction in September. Likewise, the BoE is expected to reduce its rate to 4.75%, representing a continuation of its policy easing that began in August with a 25 bps cut.
Technical Analysis: GBP/USD Breakdown and Key Levels
On the technical front, GBP/USD recently dipped to an 11-week low near the 200-day Exponential Moving Average (EMA) at 1.2850, following a breakdown of the Rising Channel on the daily chart. This pattern break signals a bearish reversal, with the 14-day Relative Strength Index (RSI) falling below 40, confirming renewed bearish momentum.
Key levels to watch include: Support: Major round-level support at 1.2800, which could provide a cushion for GBP bulls in the short term. Resistance: Upside resistance around the psychological level of 1.3000, also near the 50-day EMA, which may act as a key barrier for any potential recovery.
Outlook With Trump’s current lead, the Pound Sterling remains vulnerable to further downside. Investors should keep an eye on evolving U.S. election results and central bank policy stances, both of which will likely shape GBP/USD direction for the rest of the week.