Yesterday we saw US Inflation beat expectations to rise to 2.6% in October, leaving The Federal Reserve with a debate as to whether they cut interest rates in their last meeting before Trump’s presidency begins, or whether they leave rates unchanged. Contributing factors to inflation rising slightly were due to Energy Prices flat-lining last month, as opposed to a 1.9% drop in September, as well as an increase in Air Fares, although these were off-set by a drop in prices for clothes and furniture.
The US Dollar has kept gaining against both Sterling and Euro this morning after it was announced last night that Donald Trump had won at least 218 seats in the 435-member house after last week’s victory in Arizona. With the triple victory of Presidency now confirmed, there isn’t much standing in the way for Trump’s agenda. After making a number of appointments to his party, the signal is clear that Trump will hit the ground running with his tax agenda and tariff hikes.
These ongoing developments are proving costly for The Euro, as the Eurozone’s exports of manufactured goods from The US are now likely to be impacted. Off the back of this, The Euro has lost all of its gains against The US Dollar and is now at a level not seen since November 2023.
Further uncertainty is expected for the Euro-USD pair throughout the winter as it’s now been set that Germany will head to the polls in February, ready for a snap-election in March. A winter of political uncertainty couldn’t have come at a worst time as Europe’s biggest economy continues to struggle economically.
Pound Sterling is keeping elevated against The Euro at present, mainly due to Euro pain off the back of these tariffs that are set to be implemented in 2025. Although The UK provide Services to The US, they aren’t affected by tariffs and that in itself is helping to keep GBP at current highs.
Moving into today, we have some GDP data out for Europe which is expected to come out pretty much as forecast and therefore we may not see too much movement at the top of the hour. Turning our attention to the afternoon, we have US Producer Inflation due out which again should follow suit from yesterdays consumer data. This may lead to a little further movement for USD, however further unexpected heights could see The US Dollar break further barriers.
GBP/EUR 1.2019 GBP/USD 1.2655 GBP/AED 4.6508
GBP/AUD 1.9572 GBP/CHF 1.1245 GBP/CAD 1.7725
GBP/NZD 2.1603 EUR/USD 1.0517 GBP/ZAR 23.1086