Pound US Dollar Exchange Rate Drops in Response to BoE’s Governor’s Dovish Speech
The Pound US Dollar (GBP/USD) exchange rate is facing headwinds today after a dovish speech from Bank of England (BoE) Governor, Andrew Bailey.
At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3083, roughly down 0.8% from today’s opening levels.
Pound (GBP) Collapses Following Dovish Speech from BoE’s Governor
The Pound (GBP) is falling against the US Dollar (USD) this afternoon after the BoE’s Bailey struck a cautious tone during his speech this afternoon.
When asked if the bank would hike rates again at its next meeting, Bailey warned of an uncertain outlook reiterating how the Ukraine crisis is driving volatility into the financial markets.
‘[It] will take time before we really come to a proper assessment of how the joint experience of COVID and Ukraine invasion causes world economy to emerge into new steady state.
‘We are at an even more challenging point for global economy than after the global financial crisis.’
Furthermore, as peace talks between Russia and Ukraine remain at an impasse, it continues to weigh on the risk-sensitive Sterling.
This morning, Volodymyr Zelenskiy said he’s ‘ready to discuss neutral status’ for Ukraine, signalling preparation to meet some of Vladimir Putin’s demands to end the war.
However, Ukrainian interior ministry adviser, Vadym Denysenko, believes there will be little ‘breakthrough on the main issues’.
Peace talks are reportedly resuming on Tuesday. Should negotiations remain at a stalemate, it is likely to keep Sterling struggling against many of its peers.
US Dollar (USD) Soars Amidst Renewed Rate Hike Bets
The US Dollar (USD) is rising against the Pound (GBP) today as investors bet the Federal Reserve will deliver multiple rate hikes throughout the year.
In response to the sharp incline in commodity prices, limiting consumer spending and thus damaging the US economic recovery, the Fed is forecast to provide a hike of 50 basis points in May.
If the Fed raises rates in line with expectations, this will be the second consecutive rate hike since 2018.
Furthermore, as geopolitical uncertainty continues to stoke volatility into markets, investors are turning to the safe-haven ‘Greenback’.
Later today, USD is likely to be impacted by US President Joe Biden’s 2023 budget speech.
Biden is expected to implement a wealth tax on the 700 richest US citizens, as well as announce means to trim the deficit.