The pound sterling fell to its lowest level since early July on Thursday, extending losses that began after Donald Trump was re-elected US president. Sterling hit a low of $1.2679, down about 3% since Trump’s election victory last week. Other currencies also fell against the dollar.
with the euro falling to a one-year low and the yen hitting its weakest level since July.
In contrast, the dollar index, which measures the greenback against a basket of global currencies, remained close to a one-year high. “Forex markets typically focus on one factor at a time.
and now it’s the dollar’s dominance,” said Kathleen Brooks, director of research at the London-based Citigroup.
The dollar was boosted by market expectations that a Trump win would mean the US Federal Reserve would adopt a cautious and steady policy of cutting interest rates. In this context, Trump’s threats to impose tariffs on imports.
which reach 10% on all imported goods and 60% on imports from China.
may contribute to increasing inflation in the United States, which will slow the pace of interest cuts.
In addition, some experts believe that Trump’s plans to cut taxes may boost economic growth in the United States.
which will pose an additional challenge to lowering interest rates. It is known that high interest rates strengthen the value of local currencies.
as international investors seek higher returns on their investments.
Francesco Bisol, a currency analyst, explained that “the dollar will remain strong throughout the coming year as a result of Trump’s domestic and trade agenda.” This comes at a time when markets are concerned about the impact of Trump’s trade policies.
in light of the continued inflationary pressures in the US economy. The latest data showed that core prices rose by 0.3% in October, the third consecutive monthly increase.
Pound sterling Continues to Fall, Dollar Gains
The GBP/USD pair’s downtrend extends to a fifth consecutive day, as the US dollar (USD) continues to make gains driven by optimism about the US economic outlook. This improvement reflects recent news that President-elect Donald Trump and the Republican Party will control the Senate and the House of Representatives, giving Trump the ability to implement his economic policies with ease.
Market expectations indicate that Trump’s control of both houses will allow him to implement protectionist and expansionary plans that include raising import tariffs by 10% globally.
in addition to cutting taxes on companies and individuals, which were part of his election campaign pledges. Many investors believe that these policies could lead to higher inflation.
which could limit the ability of the Federal Reserve to cut interest rates significantly. Currently, expectations point to a possible 25 basis point rate cut in December, to a range between 4.25% and 4.50%, according to the CME FedWatch tool.
These expectations were reinforced after October’s CPI data showed inflationary pressures rising in line with expectations. Additionally, a surprise drop in jobless claims for the week ending November 8.
as well as a stronger-than-expected increase in the Producer Price Index (PPI), provided additional support for the greenback. Initial jobless claims came in at 217,000, below the previous forecast of 221,000.
while producer price inflation rose 2.4%, beating expectations of 2.3%, marking the fastest pace since September. With these economic dynamics continuing, investors are awaiting the upcoming speech by Federal Reserve Chairman Jerome Powell for any fresh guidance on the future path of interest rates.
Daily Market Summary: GBP Under Pressure
The British pound is under pressure against major currencies.
with a notable decline against the US dollar on Thursday morning, amid a state of anticipation ahead of a speech by Bank of England Governor Andrew Bailey. Bailey is expected to provide crucial signals on the Bank of England’s monetary policy.
particularly on whether the bank will decide to cut interest rates in December.
in addition to the potential impact of former US President Donald Trump’s policies on the British economy.
In previous statements following the bank’s recent decision to cut interest rates by 25 basis points to 4.75%, Bailey indicated that the monetary policy easing cycle will be more gradual. He explained that the first budget presented by the Labour Party may increase inflationary pressures.
which will affect economic growth in the United Kingdom. He also added that the bank will carefully consider economic variables before making future decisions on interest rates.
For her part, Catherine Mann, a member of the Monetary Policy Committee at the Bank of England, stressed in her speech at the annual conference of the Association of Professional Economists, the need to keep interest rates on hold until there is clear evidence of continued low inflation. While she noted that progress in reducing inflation may slow in the coming period, pointing to a possible rise in energy prices and continued inflationary pressures in the services sector.
In addition, investors are eagerly awaiting Bailey’s speech to know the future directions of the bank’s policy.
especially in light of the continued rise in service prices in the sector.
which may hinder the progress of efforts to control inflation. It is noteworthy that data on average incomes in the United Kingdom showed an unexpected rise in the three months ending in September.
