The Pound Sterling (GBP) has dipped slightly, reaching 1.2950 against the US Dollar (USD) during Tuesday’s North American session, marking its lowest level in two months. The GBP/USD pair appears set to extend its downward trajectory as the US Dollar continues to rise, nearing an 11-week high. The US Dollar Index (DXY), which measures the USD’s value against six major currencies, remains steady near 104.00.
The strengthening of the US Dollar suggests that traders are factoring in a potential victory for former US President Donald Trump in the upcoming US presidential election, which is just two weeks away. Trump has pledged to increase tariffs and lower taxes if re-elected, a scenario that could negatively impact the currencies of the US’s close trading partners and maintain high interest rates. However, national polls show a tight race between Trump and US Vice President Kamala Harris, the Democratic candidate.
On the interest rate outlook, traders expect two 25-basis point rate cuts from the Federal Reserve in November and December. However, with September’s robust economic data reducing the risks of an economic slowdown, the Fed may hold off on a larger rate cut in November.
