Pound US Dollar Exchange Rate Muted amid Heightened Geopolitical Tensions
The Pound US Dollar (GBP/USD) exchange rate is subdued this morning as the Russia-Ukraine crisis dominates headlines and infuses volatility into markets.
At the time of writing the GBP/USD exchange rate is trading at around $1.3571, down roughly 0.2% from this morning’s open levels.
US Dollar (USD) Firms as Putin Orders ‘Peacekeeping’ Troops into Ukraine
The US Dollar (USD) is ticking higher against the Pound (GBP) this morning, amidst heightened geopolitical tensions over Ukraine.
This follows the Russian President Vladimir Putin’s decision to recognise separatist-controlled areas of southeast Ukraine as independent states, and dispatch Russia troops to perform ‘peacekeeping duties’ in the region.
The move marks a major escalation of tensions between Russia and Ukraine and is likely to have much more wide-reaching consequences as Western powers prepare to impose sanctions on Russia.
The latest developments have naturally rattled markets. However the ‘peacekeeping’ mission is not the full-scale invasion previously feared, capping the US Dollar’s gains.
Pound (GBP) Underpinned by BoE Ramsden Comments
Bank of England (BoE) rate hike speculation is tempering the Pound’s losses against the US Dollar this morning.
The general consensus is the BoE will deliver its third consecutive rate hike in March.
Comments from BoE Deputy Governor Dave Ramsden have reinforced these expectations this morning.
Ramsden said:
‘In the near term, some further tightening seems likely to be needed, to prevent current high inflation becoming embedded in wage and price settings.
Ramsden was one of four policymakers who voted for a half-percentage increase to interest rates in February so his comments are not surprising. However, this doesn’t appear to be stopping them from tempering the Pound’s losses this morning.
Pound US Dollar Forecast: More Volatility ahead as Ukraine Crisis Set to Dominate
Looking ahead, the Ukraine crisis will continue to act as a key catalyst in the Pound US Dollar exchange rate.
Expect the GBP/USD exchange rate to weaken should the situation in Ukraine continue to escalate. Cautious investors are likely to favour the safe-haven ‘Greenback’
In the meantime, the release of the latest US Markit PMIs will be in focus this afternoon. Could a robust expansion in the US private sector last month buoy USD exchange rates?
For GBP investors the spotlight will be on more comments from BoE policymakers. Of particular focus will be a speech by BoE Governor Andrew Bailey on Thursday. Will a broadly hawkish consensus from BoE policymakers help to underpin the Pound?