The GBP/USD pair surged to approximately 1.2970 during the Asian trading hours on Monday, buoyed by a softer US Dollar (USD). The Greenback continues to face selling pressure following the release of disappointing US Nonfarm Payrolls (NFP) data for October, which has provided support for the major currency pair.
After implementing a 50 basis point (bps) rate cut in September to initiate an easing cycle, the US Federal Reserve (Fed) is expected to reduce its policy rate by an additional 25 bps in the upcoming November meeting, with markets pricing this scenario at a 97% probability. The anticipation of these decisions is contributing to the USD’s decline as traders prepare for both the US presidential election and the Fed’s interest rate announcement later this week.
Market analysts suggest that Donald Trump’s policies on immigration, tax cuts, and tariffs could exert upward pressure on inflation, treasury bond yields, and the USD, while Kamala Harris is viewed as the candidate representing continuity. “It is widely considered that a Trump victory would be beneficial for the USD, although many believe this outcome has already been priced in,” noted Chris Weston, an analyst at broker Pepperstone.
In contrast, the Bank of England (BoE) is also expected to cut interest rates during its meeting on Thursday, despite predictions that the Labour Party’s budget could lead to higher inflation in the UK next year. Money markets seem confident that the BoE will announce a second 25 bps reduction of the year, bringing the policy rate down to 4.75%.
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