What the UK budget and US election could mean for exchange rates

28 October 2024

Weekly Market Headlines:

• With the UK budget just two days away, the pound is near a 2.5-year high against the euro. Markets are closely watching how the budget will impact the economic outlook, as it could either support or weaken the pound.
• Only eight days remain until the US election and tight polling could lead to unexpected market reactions. As the world’s leading currency, any movement in the US dollar may also affect the pound, euro, and other currency pairs.
• Key economic data releases from the US and Eurozone are also due this week, with interest rate expectations in focus. Any change to interest rate outlooks in the Eurozone and US, could potentially drive fluctuations on euro and USD rates, adding volatility to the markets.

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The pound is close to its highest level against the euro in over two years as markets await the UK budget, Labour’s first in 15 years. Financial markets will be focused on Rachel Reeves’ plans for growth, balanced with tax hikes and spending cuts. If the budget supports growth without overreaching, it could lift the pound; however, excessive tax measures could weigh on sterling.

The US election adds another layer of potential market impact. With tight polling, the outcome may shift the dollar’s performance, especially if tariff policies spark concerns over a global economic slowdown. The dollar’s strength has already risen over 3% against the pound and euro this month, with additional shifts possible based on election results.

Critical economic data releases this week in the US and Eurozone may influence interest rate expectations and affect the euro and dollar. Lower rates in the Eurozone have already contributed to a weaker euro, while the US dollar’s movements continue to drive market reactions. With rate decisions and the election on the horizon, significant volatility across GBP, USD, and EUR exchange rates is expected.

For those navigating exchange rates, our team provides real-time insights to help you manage risks and minimize exposure during these events.

What events might move exchange rates this week?

GBP

• Wednesday: UK Budget

EUR

• Wednesday: Eurozone GDP
• Thursday: Eurozone Inflation

USD

• Wednesday: US GDP
• Thursday: US Inflation
• Friday: US unemployment data