GBP/USD price falls to 11-week low amid news of Trump victory
GBP fell to an 11-week low
The British Pound Plummets on U.S. News as Trump’s 'Tariff Plans' Begin to Take Effect
On November 6, during the early London trading hours, the British pound (GBP) sharply fell to an 11-week low of approximately 1.285 against the U.S. dollar. This drop followed news from the U.S. suggesting a likely victory for Donald Trump in the presidential election.
However, the pound later recovered and is now trading above 1.290.
According to the Associated Press, Trump was declared the winner in key swing states, including North Carolina, Pennsylvania, and Georgia. He also leads in other swing states, such as Michigan, Arizona, Nevada, and Wisconsin.
A Trump victory and his plans to increase import tariffs could negatively impact the economic growth of the United Kingdom. Economists at the National Institute of Economic and Social Research (NIESR) project that the U.K.'s GDP will grow by 1.2% in 2025 and by 1.1% in 2026. However, if Trump’s tariff plans are implemented, U.K. economic growth could slow to 0.4%.
Two Key Decisions on Thursday
On Thursday, the Bank of England (BoE) is set to announce its decision on interest rates. A 25 basis point cut to 4.75% is expected. This would be the second rate cut this year, following a similar 25 basis point reduction on August 1.
On the same day, the U.S. Federal Reserve (Fed) will also meet and is expected to cut rates by 25 basis points to a range of 4.50%-4.75%. The Fed’s decision is already priced into the market, so traders will closely watch the Fed’s commentary on future rate management.
News of Trump’s election lead also affected the U.S. Dollar Index (DXY), which rose to a new four-month high of approximately 105.30. Meanwhile, the British pound temporarily dropped to an 11-week low around 1.2850, aligning with the 200-day exponential moving average (EMA) before recovering to 1.290.
Currently, increased supply is preventing the pound from advancing toward the 1.300 level, near the 50-day EMA. Additionally, the 14-day Relative Strength Index (RSI) has dropped below 40.00, indicating a renewed bearish momentum.
As previously reported, traders are reassessing expectations for further rate cuts by the Bank of England (BoE), as the Office for Budget Responsibility (OBR) raised inflation forecasts for 2024 and 2025 to 2.5% and 2.6%, respectively, and Chancellor of the Exchequer Rachel Reeves outlined plans for a £40 billion tax increase.
