The Pound US Dollar (GBP/USD) exchange rate fell to its lowest point since December 2021 last week. Russia’s ongoing invasion of Ukraine caused a volatile risk attitude throughout the week. The escalation of the conflict saw investors flock to the safe-haven US Dollar (USD).
What’s Been Happening: Russia-Ukraine Conflict Continues as Financial Sanctions Escalate
The Pound (GBP) dipped throughout last week as risk appetite retreated in the face of sustained Russian attacks in Ukraine.
Earlier in the week, losses for Sterling had been underpinned by some cautious comments from a number of Bank of England (BoE) officials.
The US Dollar (USD) meanwhile benefitted from a prevalent risk-off trading mood as Western nations imposed a number of financial sanctions on Russia.
Additionally, hawkish comments from US Federal Reserve officials throughout the week likely bolstered the US Dollar. Ahead of the Fed’s March meeting, policymaker Christopher Waller stated that the Fed would be targeting interest rates of ‘1 to 1.25 percent early in the summer’.
Weekly highlights
- Russia-Ukraine Conflict
Global risk appetite is likely to continue to be driven by the war in Ukraine. Expected diplomatic talks between the two countries on Monday could lead to a return of risk-on trading.
2. US ISM PMIs
Forecast rises across all US private sectors could push USD higher should they print as forecast, and boost expectations of a rate hike from the Fed.
3. US Employment Data
Investors will be watching non farm payroll figures on Friday for indicators of a further tightening in the US labour market.
GBP/USD Forecast
Thursday’s final reading of the UK services PMI could boost the Pound should it rise as forecast. Additionally, any hawkish comments from a number of BoE policymaker speeches this week could further bolster the Pound.
Similarly, USD investors will be watching speeches from Fed Chair Jerome Powell for signals of a rate hike from the central bank at their March meeting. USD could climb higher from these expectations.