The British Pound (GBP) took a sharp dive against the US Dollar (USD) early Wednesday, reaching near 1.2850, as investors pivot to “Trump trades” following Republican candidate Donald Trump’s recent wins and leads in key swing states like North Carolina, Pennsylvania, and Michigan. The heightened probability of a Trump victory in the US presidential election has bolstered demand for the US Dollar, leading to a fresh 11-week low for the Pound Sterling.
Trump Leads Drive Dollar Surge, Pressures Pound Sterling
The USD surge reflects market confidence in Trump’s policy stance, especially among those betting on higher import tariffs and lower corporate taxes. These Trump-led “risk trades” have driven the US Dollar Index (DXY) up to around 105.30, a four-month high, strengthening the Dollar across global currencies.
For the Pound, Trump’s potential tariff policies could severely impact the UK’s exports to the US. In fact, analysts at the National Institute of Economic and Social Research (NIESR) project that UK economic growth may dip to a mere 0.4% if Trump’s tariffs take effect, with GDP forecasted to grow only 1.2% in 2025 and a slower 1.1% in 2026.
Pound Sterling Under Pressure from Fed and BoE Rate Cuts
The GBP/USD sell-off is further influenced by expected rate cuts from both the Federal Reserve (Fed) and the Bank of England (BoE) on Thursday. Market forecasts indicate a 25-basis-point cut from the Fed, bringing US interest rates to a target range of 4.50%-4.75%. Meanwhile, the BoE is expected to match this with its own 25-bps rate cut, lowering the benchmark rate to 4.75%.
Should these rate cuts materialize, GBP/USD volatility is likely to persist. Investors will particularly watch BoE Governor Andrew Bailey’s comments for insights on future policy moves, inflation outlooks, and economic impacts from Trump’s election trajectory.
Also read : Market Reactions To US Elections- How Political Odds Affect GBP/USD Movements?
Technical Analysis: GBP/USD Shows Bearish Momentum
From a technical perspective, the GBP/USD pair faces a bearish reversal following a breakdown from a Rising Channel on the daily chart. This slide has pulled the 14-day Relative Strength Index (RSI) below the 40-mark, indicating a renewal of downward momentum.
Support for the Pound appears around 1.2800, a key psychological level, while resistance sits near 1.3000. If Pound Sterling fails to stabilize above 1.2850, more downside may follow, challenging GBP bulls attempting to recover from the broader Dollar strength.
