The Pound US Dollar (GBP/USD) exchange rate dropped over the course of last week. The ongoing Russian invasion of Ukraine weighed heavily on global risk sentiment and saw investors flock to the safe-haven ‘Greenback’. Above-forecast US employment figures also boosted the US Dollar (USD) which pushed the currency pair lower.
What’s Been Happening: Markets Shocked as Russia Attacks Nuclear Plant
The GBP/USD exchange rate began last week on a downward trend as the Russian invasion of Ukraine intensified. Russian missile strikes on a television tower in central Kyiv likely added to pressure on the already struggling Pound (GBP).
A cautious stance from BoE officials including Governor Andrew Bailey likely piled additional pressure on Sterling last week.
On the other hand, a renewed hawkish turn from Fed Chair Jerome Powell could have helped push USD even higher. Speaking in front of the US Congress, Powell stated that he was ‘inclined’ to support’ a rate hike at the Fed’s March meeting.
Friday saw the GPB/USD currency pair fall even further amid a retreat in global risk appetite following a Russian attack on the Zaporizhzhia nuclear plant.
Additionally, robust US employment helped to further bolster USD on Friday. February’s non farm payrolls figures printed at 678K compared to the forecast drop to 400K.
Weekly highlights
- Invasion of Ukraine – Developments in the conflict are set to continue to dominate global risk appetite. Renewed attempts at ceasefire talks may help restore some risk-on sentiment to the markets.
- US Feb Inflation Rate – Figures are expected to show a further rise to US inflation on Thursday which could push USD higher. Soaring oil prices and the Ukraine-Russia conflict have bolstered investor expectations of a rate hike from the Fed.
- UK Jan GDP Figures – The beleaguered Pound could see some of its losses underpinned should Friday’s figures tick upward as forecast.
GBP/USD Forecast
Despite the Ukraine-Russia conflict dominating the UK’s political sphere, further tensions surrounding the Northern Ireland Protocol could weigh on GBP. A potential further retreat in US Treasury bond yields could cap gains for USD.