1.3500 in sight: British Pound edges towards level against US Dollar amid Trump's US midterm defeat

GBP/USD gains 0.5% on Wednesday. The pair climbs above 1.3480 to set new seven-week highs.
Reports of a Democratic victory in the US midterm elections sent the US Dollar sharply lower across currencies.
Expectations that the BoE will raise rates on Thursday have supported the Pound in recent days.

GBP/USD was up 0.5% on Wednesday at the time of writing. The British Pound (GBP) extended its advance against a weak US Dollar (USD), hitting seven-week highs above 0.3480. The rally gathered pace after reports that the Democrats had secured both the House and the Senate in Tuesday’s US midterm elections.

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The US results have underscored widespread rejection of President Donald Trump’s policies. That disapproval has extended to Kansas, Ohio, North Carolina and Texas, strongholds under Republican rule for decades.

As the first results pointed to a Democratic victory, the US Dollar fell broadly. Investors worry that Democrats will seek tighter regulation of the AI sector and curb data centre expansion. Those concerns sparked selling in AI-related shares and a flight to the safety of government bonds.

According to Rabobank analysts, markets initially interpreted Democratic control of Congress as pointing to “fewer fiscal giveaways and therefore less inflation,” a mix that “suggests lower yields on treasuries which have negative implications for the USD.”

4.0% Bank Rate in Focus Ahead of Thursday’s BoE Decision

A quarter-point increase in the Bank of England’s (BoE) Bank Rate to 4.0% is hoped for at the conclusion of Thursday’s monetary policy meeting. Those expectations have kept the Pound moderately supported over recent days.

The policy path beyond Thursday remains less certain. Recent remarks from BoE policymakers suggest that the monetary policy committee is divided over further tightening, while Government Bailey has tended to downplay inflationary pressures. Should Thursday’s increase carry a dovish message, a substantial pullback could follow as Pound bulls may opt to take profits.

US midterm elections: key questions

US midterms: which offices are contested?

Held at the midpoint of a president’s four-year term, the US midterms are federal elections. All 435 seats in the House of Representatives and roughly one-third of Senate seats are contested. In many states, voters also elect governors and other state and local officials.

3 November 2026: when do Americans vote?

Tuesday, 3 November 2026 is Election Day. Under federal law, voting takes place on the Tuesday following November’s first Monday. Many states already have early and postal voting under way.

US midterms: what is at stake?

Control of both chambers of Congress for the final two years of President Donald Trump’s term is determined by the midterms. Each chamber’s majority party directs its legislative agenda and selects committee leaders. In the Senate, it also controls the confirmation of judges and senior officials.

2026 midterms: is the presidency being contested?

No presidential vote takes place in the midterms. Presidential elections are held every four years, with the next scheduled for November 2028. Often treated as a verdict on the incumbent president’s party, midterms have historically tended to cost that party seats in the House.

2026 midterms: what could move the US Dollar?

A limited, temporary US Dollar response is what most analysts anticipate, rather than a sustained trend. Split control of Congress is the widely held base case and is already partly reflected in prices. The results could have a more pronounced impact on Treasury yields. If an outcome increases expectations of fiscal stimulus, yields and the US Dollar typically rise; a legislative impasse that constrains fresh spending can weigh on both. Disputes over funding or the debt ceiling can also generate brief safe-haven demand for the Dollar. Across a six-to-twelve-month horizon, economic growth and Federal Reserve policy carry more weight than the election.

12 months after midterms: how have US stocks performed?

Historically, US equities have struggled ahead of midterms before strengthening afterwards. Since 1950, every midterm election has been followed by a higher S&P 500 12 months later: 19 out of 19 occasions, with gains averaging about 15%. Analysts attribute this pattern to the removal of uncertainty once the outcome is clear. Past performance does not guarantee future returns, and some strategists note that high valuations in 2026 could test the streak.

Divided Congress: a positive for markets?

By reducing the likelihood of major changes to taxation, spending and regulation, political gridlock has often made divided government welcome in markets. With a Republican president in office, the S&P 500 has historically performed well in the years after midterms that divided control of Congress. Funding deadlines, debt-ceiling disputes and congressional investigations remain risks that can increase short-term volatility.