GBP/USD Exchange Rate Firms as Democrats Poised to Take Control of the Senate
The Pound to US Dollar (GBP/USD) exchange rate is trending higher this morning amidst the rising expectations that the Democrats will claim a clean sweep in Georgia’s Senate runoffs.
At the time of writing the GBP/USD exchange rate is trading at around $1.3650, up roughly 0.2% from today’s opening rate.
US Dollar (USD) Slips on Stimulus Hopes
A US Dollar (USD) selling bias has prevailed once more today, as demand for the safe-haven ‘Greenback’ is dampened by the improving market mood.
The positive sentiment is mostly being driven by the rising expectation that the Democrats will win both seats in Georgia’s Senate runoffs as early results point to a narrow lead for the party, with mostly votes from Democratic leaning area still to be counted.
A clean sweep for the Democrats would hand control of both houses of the Congress to the incoming administration, likely paving the way for Joe Biden to push through more stimulus as well increasing government investment.
Stuart Clark, portfolio manager at Quilter Investors, comments
‘With early votes leaning more heavily Democrat than might have been expected it would seem likely, but not yet confirmed, that the Senate may indeed swing blue via the two Georgian seats. Of course, as we have seen with recent US elections there is a long way to go before we get official results, but for now it appears like President-elect Biden will be able to enact much of his agenda in his first four years in office.’
In addition, with the Democrats only securing a razor-thin majority in the Senate, it should prevent Biden from pursuing any market unfriendly reforms.
Pound (GBP) Capped by Lockdown Concerns
At the same time, the Pound’s (GBP) gains against the US Dollar (USD) appear limited this morning amidst ongoing concerns over the UK’s new strict lockdown measures.
The new measures legally came into force today, with MPs set to vote retrospectively on the lockdown later in the day.
The strict lockdown, which sees all non-essential businesses shuttered and schools closed, is likely to take a notable chuck out of the UK’s GDP in the first quarter of 2021.
Bank of England (BoE) Governor Andrew Bailey will speak before the Treasury select committee later this afternoon, with Bailey no-doubt being grilled on the BoE’s take on the lockdown, with Sterling likely to face some pressure if he warns that it could have a significant impact on the BoE’s growth forecasts for 2021.