– Written by
David Woodsmith
STORY LINK Pound to Dollar Forecast: Democratic Sweep Lifts GBP/USD to 7-Week High
The Pound to Dollar exchange rate (GBP/USD) climbed to a seven-week high around 1.3495 as the US Dollar weakened following the Democrats’ sweep of both chambers of Congress in the midterm elections.
Pound Sterling also drew support from expectations of a Bank of England rate hike on Thursday, with markets now watching whether GBP/USD can break above 1.3500
GBP/USD Forecasts: Hits Seven-Week High
The Pound to Dollar (GBP/USD) exchange rate strengthened sharply on Wednesday as the US Dollar came under pressure following the Democratic sweep in the US midterm elections.
GBP/USD climbed to around 1.3495, its strongest level since mid-September, as investors assessed the implications of Democrats taking control of both the House and Senate.
Sterling also remained supported ahead of Thursday’s Bank of England policy decision, with markets still expecting a 25 basis-point rate increase to 4.00%.
Scotiabank sees scope for further Dollar losses; “We continue to highlight fundamental downside risk to the USD and DXY, given that it continues to trade well above levels implied by our FV estimate.”
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UoB had also highlighted scope for GBP/USD to extend its advance towards 1.3480, a level that has now been surpassed.
Democratic Sweep Weighs on Dollar
The Dollar weakened after Democrats won control of both chambers of Congress, creating divided government for the final two years of President Donald Trump’s term.
Markets had largely anticipated Democratic gains in the House, but the clean sweep was a more significant outcome than many investors had priced.
The result increases the potential for political gridlock over government funding, debt-ceiling negotiations and elements of the administration’s economic agenda.
It has also increased expectations of tighter congressional scrutiny of the US technology sector.
ING had commented ahead of the results; “Our baseline assumption is that markets fully price in a Republican loss of the House, but only partially a Democratic clean sweep. A blue sweep can put some pressure on the dollar.”
The bank added that tougher regulation could weigh on AI stocks, which has become increasingly important for the Dollar given the close relationship between US technology-sector sentiment and capital inflows.
The Dollar index subsequently slipped as investors reduced exposure to the US currency.
Strong US Jobs Data Limits Dollar Downside
The Dollar’s losses have nevertheless been contained by relatively encouraging US labour-market data.
JOLTS job openings increased to 7.523mn in September from 7.19mn previously, comfortably above consensus forecasts around 7.15mn.
Hiring also increased, while layoffs fell to their lowest level since March 2025.
The stronger figures suggest that the US labour market remains resilient despite relatively weak payroll growth.
Markets continue to price a significant probability that the Federal Reserve will raise interest rates again in December.
This should limit the extent of any sustained Dollar sell-off unless incoming inflation and employment data weaken materially.
For Sterling, the immediate focus now turns to Thursday’s Bank of England meeting.
The BoE is widely expected to increase Bank Rate from 3.75% to 4.00%, its first hike since 2023.
The main market focus will be on the vote split and the Bank’s guidance over how much further tightening may be required in 2027.
A relatively hawkish message could push GBP/USD above 1.3500 and bring the mid-1.35s into focus.
Conversely, if policymakers push back strongly against expectations for three or four further rate hikes next year, Sterling could give back part of its recent gains.
For GBP/USD, 1.3500 is now the immediate resistance area, with 1.3400 providing initial support.
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TAGS: Pound Dollar Forecasts
