Pound to Dollar Hits Best Exchange Rate in Six Weeks as US Elections Loom

Modified: Monday, 2 November 2026 20:31 BST - Written by David Woodsmith

STORY LINK Pound to Dollar Hits Best Exchange Rate in Six Weeks as US Elections Loom

The Pound to US Dollar (GBP/USD) exchange rate climbed to a six-week high on Monday as uncertainty ahead of the US mid-term elections weighed on the 'Greenback'.

Having retreated from its earlier peak, GBP/USD was trading at around $1.3420 at the time of writing, still up approximately 0.2% on the day.

The US Dollar (USD) came under pressure at the start of the week as investors grew cautious ahead of Tuesday's congressional elections.

Polling suggested that Democrats could make gains in the House of Representatives, while control of the Senate remained less certain.

The possibility of a change in the balance of power in Congress has raised questions about President Donald Trump's ability to advance his fiscal agenda and broader economic policies.

A divided Congress could make it more difficult for the administration to secure approval for new tax and spending measures, potentially altering expectations for US government borrowing and economic growth.

With the outcome uncertain, some investors appeared reluctant to increase their Dollar exposure ahead of the vote.

The 'Greenback' also struggled to benefit from stronger-than-expected US manufacturing data.

The latest manufacturing PMI exceeded forecasts, suggesting that activity across the American factory sector remained resilient.

However, improving global risk appetite reduced demand for traditional safe-haven currencies, limiting the Dollar's response to the encouraging figures.

The combination of election uncertainty and a more positive market mood allowed Sterling to extend its recent recovery against the US currency.

The Pound (GBP), meanwhile, retained support from another decline in UK government borrowing costs following Chancellor John Healey's Autumn Budget last week.

The benchmark 10-year gilt yield fell to its lowest level in six weeks, extending the recovery in UK bond markets after the Chancellor's fiscal plans largely reassured investors.

The decline suggested that concerns about the government's borrowing strategy had eased, reducing some of the pressure that elevated debt-servicing costs have placed on the public finances.

Although lower bond yields can sometimes weaken a currency by reducing its interest rate advantage, the latest move appeared to reflect greater confidence in the UK's fiscal outlook.

This helped Sterling maintain its recent gains against the Dollar.

However, the Pound struggled to build on its early advance, with some investors taking profits after GBP/USD reached a six-week high.

A quiet UK economic calendar also left Sterling without a fresh domestic catalyst, contributing to the loss of momentum later in the session.

Near-Term GBP/USD Forecast: US Elections and Jobs Data Could Test $1.34

The Pound to US Dollar exchange rate could experience further volatility on Tuesday as investors assess the latest US economic figures and developments surrounding the mid-term elections.

September's Job Openings and Labor Turnover Survey (JOLTS) is expected to show an increase in vacancies, potentially offering reassurance that demand for workers remains resilient.

US factory orders are also forecast to have risen by 1.2% during September.

Stronger-than-expected readings could support the Dollar by reinforcing confidence in the American economy and strengthening expectations that the Federal Reserve has room to maintain a relatively restrictive monetary policy stance.

However, the market reaction may be restrained as investors await greater clarity over the congressional elections.

Any unexpected shift in the political outlook could influence expectations for US fiscal policy, government borrowing and economic growth, potentially triggering fresh Dollar volatility.

For Sterling, the absence of major UK economic releases means developments in government bond markets may remain an important influence.

Further declines in gilt yields could provide reassurance that the Autumn Budget has avoided unsettling investors, helping the Pound retain its recent gains.

GBP/USD will also remain sensitive to broader risk appetite, with a more positive market mood potentially favouring Sterling over the safe-haven Dollar.

The $1.3400 level remains an important near-term reference point following Monday's advance.

A sustained move above this area could encourage another challenge of the six-week high, while renewed Dollar strength could push GBP/USD back towards $1.3350.

With the US elections approaching and the Bank of England's latest interest rate decision due later in the week, the pairing may remain volatile as investors reassess the outlook for both currencies.

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TAGS: Pound Dollar Forecasts