The Pound US Dollar (GBP/USD) continued to climb over last week despite interest rate decisions from the Federal Reserve and Bank of England (BoE). Hopes for a peaceful solution in the Russia-Ukraine conflict helped to global risk appetite to recover.
What’s Been Happening: BoE and Fed Raise Interest Rates as War in Ukraine Continues
The Pound (GBP) remained strengthened last week as markets remained hopeful for progress in Russia-Ukraine peace talks. Reports last week indicated that both sides were hammering out a fifteen point peace plan.
Sterling suffered later on last week following the BoE’s decision to hike interest rates by 0.25%. Markets had been hoping for a more aggressive hike and this, coupled with a dovish outlook from the central bank, saw GBP fall on Thursday.
The US Dollar (USD) suffered last week amid risk-on trading. The continual attacks on Ukrainian cities by Russian forces kept some trading focused on USD however.
USD saw a boost on Wednesday following the Fed’s announcement of an 0.25% interest rate hike. Whilst markets had largely priced in the move, hawkish forward guidance from Fed Chair Jerome Powell pushed the US Dollar higher.
Weekly highlights
- War in Ukraine
The conflict is set to continue to dominate risk sentiment in the markets. Ukrainian forces in Mauripol refused surrender today as Russian forces encircle the city.
2. UK Inflation
February’s rate of inflation is forecast to continue to climb on Wednesday which could push GBP higher.
3. US Initial Jobless Claims
Figures are set to dip on Thursday which may reduce claims of a tight labour market in the US. This may cause USD to dip.
GBP/USD Forecast
Flash PMIs for the UK’s private sectors in March could limit potential gains however. All sectors are forecast to fall on Thursday. A predicted fall to February’s retail sales could also pull GBP lower.
A number of speeches from Fed policymakers this week could help boost USD should they echo the Fed’s hawkish sentiment. On Thursday, a forecast fall to US private sector growth for March could see the US dollar fall however.