Pound US Dollar (GBP/USD) Exchange Rate Looking to Stutter Further
The Pound US Dollar (GBP/USD) exchange rate is poised to falter further as policy divergence continues to weigh on the Pound US Dollar pairing. With the Ukraine crisis showing no sign of slowing, risk-averse sentiment looks set to dominate and potentially push GBP/USD even lower.
At time of writing the GBP/USD exchange rate is around $1.3097, relatively unchanged from this morning’s opening rate.
US Dollar (USD) Set to Extend Upside with Hawkish Rhetoric
The US Dollar (USD) could see a further boost with the release of the Federal Open Market Committee (FOMC) minutes later today as the ‘Greenback’ continues to enjoy moderate success on the back of positive data and continued hawkish commentary from the Fed.
President Biden is set to announce further sanctions against Russia this week, including the targeting of oligarchs and their families, as well as several major banks. The US and its allies are making fresh attempts to cripple Russia’s economy and war effort after the latest emergence of civilian killings in Ukraine.
The continuing dwindling of global risk appetite favours the ‘greenback’ with the situation darkening yet again, with no peace talks set to take place. The US Dollar is set to continue its upside against most its peers, with any negativity out of Ukraine likely to support the US Dollar.
Pound (GBP) Poised to Slide amid Ukraine Fears
With the deteriorating situation in Ukraine continuing to affect risk-sensitive currencies such as the Pound, further losses can be expected as a negotiated end to the conflict is no longer on the horizon. Ukrainian President Volodymyr Zelenskyy announced that a face-to-face meeting with Putin might not be possible after news of a massacre in the Ukrainian town of Bucha surfaced, delaying a diplomatic end to the conflict.
With the swift reaction from the US and Europe on imposing further sanctions, a growing risk-averse market is likely to weigh on the GBP/USD exchange rate. If the UK were to impose further sanctions themselves, an inevitable impact to the economy will follow suit, denting the Pound.
The continued dovish stance from the Bank of England over rising inflation and soaring cost-of-living could further hinder the Pound against the US Dollar, a balancing act between acting cautiously and over-committing to any further hikes. Without any further data due out this week for the Pound, all eyes will be on the unravelling situation in Ukraine and if the US Dollar continues to trend higher amid the Fed’s continuous hawkish sentiment.