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Pound to US Dollar (GBP/USD) Exchange Rate Rises as US Political Developments Remain in Focus

November 3, 2020 - Written by John Cameron

GBP/USD Exchange Rate Rises as Hopes of US Biden Victory Steadies Risk Sentiment

The Pound to US Dollar (GBP/USD) exchange rate rose by 0.9% today, with the pairing currently trading around $1.304.

Sterling rose against the US Dollar (USD) today as the US faces the hotly debated 2020 presidential elections.

As a result, investors are bracing for the outcome from this evening’s US political elections, which looks increasingly like a secure win for Democratic candidate Joe Biden, who retains his 8-point lead over the incumbent President Donald Trump.

Raffi Boyadjian, an analyst at XM, highlighted some of the concerns, however, saying:

‘[T]he biggest worry for investors isn’t who will be the next occupant of the White House but the prospect of a tight finish where the final result won’t be known for weeks. Trump has reportedly threatened to legally challenge the results in some battleground states and a prolonged legal fight is the worst outcome for the markets right now as it would cause political gridlock and delay any agreement on a new fiscal stimulus bill.’

In US economic data, today saw the release of September’s Factory Orders, which beat forecasts and rose by 1.1%.

Consequently, hopes for America’s economic recovery have continued to grow. But with uncertainties over the US elections, this has had provided little boost for the ‘Greenback’.

Pound (GBP) Rises as UK Government Insists that Lockdown Will Last Until Early December

Sterling rose against the US Dollar (USD) despite growing concerns for Britain’s economy as the nation faces its second national lockdown on Thursday of this week.

As a result, GBP investors fear that the UK could be headed for a ‘double-dip’ recession in the fourth quarter.

Nonetheless, Prime Minister Boris Johnson has continued to insist that the lockdown will end on December 2nd.

Mr Johnson said:

‘We have a very clear way ahead. These measures – the crucial thing to understand is that they expire on 2 December. They come to an end. And we therefore as a government and indeed as a country have a deadline and a target to develop solutions which previously … did not exist.’

Brexit remains an issue, with UK-EU trade talks continuing without any clear updates or progress reports.

However, if we see any signs of progress towards a post-Brexit trade deal, then the Pound would head higher as at least one dimension of political uncertainty is resolved.

GBP/USD Forecast: Could the ‘Greenback’ Rise as US Political Uncertainty Intensifies?

The US Dollar (USD) will remain heavily influenced by the outcome of tomorrow’s US presidential elections.

Any further uncertainty – such as Donald Trump contesting the initial results – would bolster demand for the safe-haven ‘Greenback’.

However, if the outcome confirms the polls and all goes relatively smoothly – with Joe Biden becoming the new president – then demand for the US Dollar could slip.

Meanwhile, the GBP/USD exchange rate could face further volatility as the UK heads into lockdown on Thursday and Brexit news remains thin on the ground.

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