US Dollar (USD) Exchange Rate Forecast Hinges on Trump Presidential Race Performance

Published: Monday, 12 September 2016 12:00 BST - Written by Tim Boyer

STORY LINK US Dollar (USD) Exchange Rate Forecast Hinges on Trump Presidential Race Performance

Multi-Year Low for GBP USD Exchange Rate Following UK Brexit Vote

The Pound Sterling US Dollar (GBP/USD) exchange rate struck a multi-year low in the wake of June’s UK Referendum result, plunging to a near-term low in the 1.2800s during the first week of July and again in the middle part of last month.

The shift lower for Cable was largely driven by a wholesale abandonment of the UK unit in the wake of the Brexit vote and this was added to by elevated expectations that the US Federal Reserve would be increasing its benchmark interest rate at least once more before the end of the year. This belief has receded during the weeks following the break lower for the GBP USD interest rate as Dollar-watchers eye the upcoming US Presidential Election.

Fed Rate Hike Bets Likely to Impact Pound Sterling US Dollar Exchange Rate Trading

As has been the case for much of the year, Federal Reserve interest rate hike expectations will continue driving US Dollar (USD) exchange rate forecasts in the weeks ahead.

The current consensus amongst analysts is that, given the slightly softer tone of recent US jobs data and the fact that the election will take place in November, any change to US interest rates is highly unlikely for the Fed meeting later this month – the money markets price-in only a 24% implied percentage chance that the US central bank will alter its policy path in what is considered to be its final ‘live’ get-together before America votes for a new President on Tuesday 8th November.

Although another policy decision is penned in for 2nd November, it will not be followed by a Press Conference from Fed Chair Janet Yellen -any interest rate change following such a meeting is highly unusual.

US Dollar Exchange Rate Forecast Depends on Outcome of US Presidential Election

US Dollar (USD) exchange rate forecasts are likely to remain uncertain until investors have more of a gauge on the Federal Reserve's intentions moving forward.

What the Fed does after this year’s Presidential Election is anyone’s guess and largely depends on who wins. Leading London-listed betting exchange Betfair (PPB.L) pegs maverick Republican candidate Donald Trump’s current chances of moving into the White House next year at just under 30%.

Although he’s a clear outsider, in a two horse race Trump has a real chance; given his divisive comments on domestic and foreign policy and the potential negative effect on inward investment into the states which a Trump victory could trigger, the Fed is considered highly unlikely to go for a rate hike at its December meeting if Trump wins in November. In such an event, the US Dollar (currency : USD) is forecast to significantly underperform in the global currency markets.

As it stands the Pound Sterling to US Dollar (GBP/USD) exchange rate is trending in the region of 1.3248.

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