(Updated 16:45 08/03/22)
The Pound US Dollar GBP/USD exchange rate has remained muted today. Bets on the safe-haven ‘Greenback’ have been driven by concerns over the impact of the Russia-Ukraine conflict. On the other hand, a gradual return of some risk appetite has bolstered the Pound (GBP).
At time of writing the GBP/USD exchange rate is at around $1.3096, which is vritually unchanged from this morning’s figures.
Pound US Dollar (GBP/USD) Exchange Rate Subdued amid Return of Risk Appetite
The Pound US Dollar (GBP/USD) exchange rate is trading within a narrow range today. The Pound (GBP) has been bolstered by a mild rebound to global risk appetite. The US Dollar (USD) meanwhile has been kept buoyant amid the Ukraine-Russia conflict. The currency pair is currently trading at around its lowest point since November 2020.
At time of writing the GBP/USD exchange rate is at around $1.3119, virtually unchanged from this morning’s opening figures.
Pound (GBP) Edges Higher as Temporary Russia-Ukraine Ceasefire Agreed
The Pound (GBP) is making gains against its riskier competitors today. A cautious return of risk appetite to the markets has helped boost GBP. Sterling is still struggling against its safer competitors however amid pressure from the Ukraine-Russia conflict.
The Pound may make additional gains today after reports that both sides have agreed to organise a humanitarian corridor. Russian and Ukrainian forces have agreed a temporary ceasefire to allow civilians to escape the city of Sumy.
Ukrainian Deputy Prime Minister Irina Vereschuk warned of Russian interference in the evacuation however:
‘The Russian side is preparing to disrupt the work of humanitarian corridors and manipulate the route to force people to go the other way.’
Sterling could see headwinds today from fresh Brexit-related fallout. Bank of England (BoE) Deputy Governor Jon Cunliffe stated that it was likely banks would continue to leave the UK for other financial centres.
In the speech on Mondauy, Cunliffe went on to say that it would be ‘a number of years’ before the full impact of Brexit on the UK’s financial sector would be felt.
US Dollar (USD) Gains as Russia Threatens to Cut Gas to Europe
The US Dollar (USD) is continuing to climb against its main competitors today. On the other hand, some demand for the safe-haven ‘Greenback’ has been sapped by a return of confidence in the Euro (EUR). Additionally, an uptick in US Treasury bond yields has likely helped limit any major losses for USD.
The US Dollar’s safe-haven status has seen investors flock to it since Russian troops crossed the border into Ukraine 13 days ago. Despite renewed efforts by Ukraine to evacuate major population centres, Russian forces have continued to direct artillery attacks into civilian-populated areas.
Demand for USD is likely to continue to remain high in the face of Russia’s threats to limit gas supplies to Europe.
Speaking on Monday, Russian Deputy Prime Minister Alexander Novak warned that the country may cut of its main gas pipeline to Germany. This statement came in response to reports that Western nations may ban imports of Russian oil.
Pound US Dollar Exchange Rate Forecast: Will Higher US Inflation Prompt Fed Rate Hike?
Looking to the week ahead for the Pound, GDP figures for January are forecast to rise on Friday. Sterling could make some gains should these figures print as forecast.
The Pound is also likely to be affected by the resuming of talks concerning the Northern Ireland Protocol on Tuesday.
For the US Dollar, a forecast widening of the country’s trade deficit could hamper upward movement for USD on Tuesday. On Wednesday, JOLTS job opening figures for January are predicted to remain unchanged. This could push the US Dollar higher off of bets of a March interest rate hike for the Fed.
Finally a forecast rise to US inflation in February could also lift these bets and help USD climb.