GBP/USD depreciates to near 1.2950 due to market caution ahead of US presidential election

• GBP/USD faces challenges as the US Dollar appreciates amid market caution ahead of the US presidential elections.

• The latest Reuters/Ipsos poll indicates that Harris holds a narrow lead at 46% compared to Trump's 43%.

• UK's budget features £40 billion in tax increases designed to address public finance shortfalls and support funding for public services.

GBP/USD extends its losses for the second successive day, trading around 1.2950 during the Asian session on Thursday. This downside of the pair could be linked to the solid US Dollar (USD) as a market caution persists amid uncertainty surrounding the upcoming US presidential election.

Former President Donald Trump has made gains among Hispanic men as the November 5 US presidential election approaches. Meanwhile, Harris has seen increased support among white women. The race between the two candidates is extremely close, with Harris holding a slight lead of 46% to 43% in the latest poll conducted from October 16 to 21.

Traders are now focusing on upcoming key US data releases including PCE inflation data on Thursday and Nonfarm Payrolls (NFP) on Friday. On Wednesday, the Greenback encountered headwinds as the US Gross Domestic Product (GDP) annualized expanded by 2.8% in Q3, below 3.0% in Q2 and forecasts of 3.0%. However, the ADP Employment Change reported 233,000 newly added workers in October, marking the largest increase since July 2023.

The Pound Sterling (GBP) dipped following the release of the UK's new Labour government's first budget on Wednesday, which includes £40 billion in tax increases aimed at addressing public finance shortfalls and funding public services, according to CNBC. A significant revenue-generating measure in the budget is an increase in National Insurance (NI) contributions, which are taxes on earnings paid by employers.

Traders are also expected to pay close attention to a keynote speech by Bank of England (BoE) Deputy Governor Sarah Breeden at the Hong Kong Monetary Authority and Bank for International Settlements joint conference on the “Opportunities and Challenges of Emerging Technologies in the Financial Ecosystem.”