British Pound nears 1.3500 against US Dollar amid Trump's defeat in US midterms
- GBP/USD rallies 0.5% on Wednesday and reaches fresh seven-week highs above 1.3480.
- The US Dollar tumbled across the board amid news of the Democrats' victory in the US midterm elections.
- Market expectations of a BoE rate hike on Thursday have been boosting the Pound over the last few days.
The British Pound (GBP) accelerated its rally against a weak US Dollar (USD) on Wednesday, boosted by news that the Democrats took control of the House and the Senate in the US midterm elections held on Tuesday. The GBP/USD has appreciated 0.5% on the day so far, reaching seven-week highs above 0.3480 at the time of writing
News from the US has confirmed resounding disapproval of President Donald Trump’s policies, which has reached strongholds such as Kansas, Ohio, North Carolina, and Texas, which have been governed by Republicans for decades.
The US Dollar dropped across the board immediately after the release of the first results showing the Democratic victory. Investors fear that Democrats will push for tougher regulation in the AI sector and put a brake on data center growth, which triggered a selloff in AI-related shares and a rush for safety into Government bonds.
Analysts at Rabobank also note that markets had initially read Democrat control of Congress as a signal of “fewer fiscal giveaways and therefore less inflation,” a combination that “suggests lower yields on treasuries which have negative implications for the USD.”
Markets brace for a BoE rate hike on Thursday
The Pound, on the other hand, has been showing a moderately bid tone over the last few days, supported by hopes that the Bank of England (BoE) will hike its Bank rate by a quarter-point, to 4.0% after its monetary policy meeting on Thursday.
What is not that clear, though, is what will come next. The BoE’s monetary policy committee shows split on further monetary policy tightening, according to recent comments by BoE policymakers and Government Bailey has shown a tendency to play down inflation pressures. A dovish hike on Thursday might trigger a significant pullback as pound bulls might be tempted to take profits.
US midterm elections FAQs
The US midterm elections are the federal elections held halfway through a president's four-year term. Voters choose all 435 members of the House of Representatives, about one-third of the Senate, and, in many states, governors and other state and local officials.
Election Day is Tuesday, November 3, 2026. Federal law sets it as the Tuesday after the first Monday in November. Early voting and mail voting are already under way in many states.
They decide which party controls each chamber of Congress for the last two years of President Donald Trump's term. The majority party sets the legislative agenda, chooses committee leaders and, in the Senate, controls confirmations of judges and senior officials.
No. The president is elected every four years; the next presidential election is in November 2028. Midterms are often seen as a referendum on the sitting president's party, which historically tends to lose House seats.
Most analysts expect a modest, short-lived reaction in the US Dollar rather than a lasting trend. A divided Congress is widely seen as the base case and is partly priced in. Treasury yields may react more noticeably to the results. Outcomes that raise expectations of fiscal stimulus tend to lift yields and the US Dollar, while gridlock that limits new spending can pull both lower. Political friction, such as funding or debt-ceiling standoffs, can also briefly lift the Dollar as a safe haven. Over six to twelve months, growth and Federal Reserve policy matter more than the vote.
US stocks have historically been weak before midterms and strong after them. Since 1950, the S&P 500 has been higher 12 months after every midterm election, 19 out of 19, with an average gain of about 15%. Analysts link the pattern to uncertainty fading once results are known. Past performance does not guarantee future returns, and some strategists note that high valuations in 2026 could test the streak.
Markets have often welcomed a divided government because gridlock makes sweeping changes to taxes, spending and regulation less likely. Under a Republican president, the S&P 500 has historically done well in years following midterms that split control of Congress. The risks are funding deadlines, debt-ceiling fights and congressional investigations, which can add short-term volatility.
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