(Updated 16:45 22/03/22)
The Pound US Dollar (GBP/USD) exchange rate has continued to climb today amid a buoyant risk appetite. Post-Powell gains for the US Dollar (USD) seem to have been short lived.
The Pound (GBP) meanwhile may have continued to be supported by expectations surrounding Wednesday’s budget announcement. Analysts are expecting Chancellor Rishi Sunak to announce a range of measures to support UK households.
At time of writing the GBP/USD exchange rate is at around $1.3254, up roughly 0.7% from this morning’s opening figures.
Pound US Dollar (GBP/USD) Exchange Rate Bolstered as Peace Talks Continue
The Pound US Dollar (GBP/USD) exchange rate is climbing today. Optimism over peace talks between Russia & Ukraine is likely causing increased risk-on trading in the Pound (GBP). Meanwhile, a downturn in US Treasury bond yields is weighing on the US Dollar (USD).
At time of writing the GBP/USD exchange rate is at around $1.3215, which is up roughly 0.4% from this morning’s opening figures.
Pound (GBP) Boosted as Zelenskiy Signals Willingness to Negotiate
The Pound (GBP) is making gains against many of its competitors today. Reports of further successful humanitarian efforts in Ukraine may be helping to boost risk-on trading today. Expectations of further rate hikes from the Bank of England (BoE) may also be helping the Pound to climb.
Reports indicate that further attempts will be made to evacuate Ukrainian civilians from Mariupol today. A convoy of 15 buses will attempt to escape through Russian occupied territory. Previous attempts were met with Russian shelling.
Further comments by Ukraine’s President Volodymyr Zelenskiy signalling a willingness to negotiate a peace agreement may also be boosting GBP today. Speaking on Monday, Zelensky reiterated his desire to meet Russia’s President Vladimir Putin in person in order to bring an end to the conflict.
Today’s public borrowing figures for the UK may also be impacting the Pound’s movement today. Whilst figures for February came in above forecasts, the UK’s borrowing over the past year remains below forecasts. Analysts feel this may give Sunak more room to provide support in his budget on Wednesday. This is likely bolstering GBP today.
US Dollar (USD) Falls amid Risk-On Market Mood
The US Dollar is dropping against many of its rivals today amid a return of global risk appetite. Positive news from the frontline in Ukraine has limited risk-off trading in the markets today.
Further attacks on Ukrainian cities could limit risk appetite today however. Naval attacks on the city of Odesa, the first since the war began, prompted fears of a seaborne operation from Russian forces. Reports of fresh explosions in Kyiv today may also prompt renewed risk-off trading.
Significant losses for USD may be limited following a series of hawkish statements from Federal Reserve officials however. On Tuesday, Fed Chair Jerome Powell reiterated the central bank’s hawkish stance and outlined how the Fed would move ‘more aggressively’ on rate hikes if necessary. Further speeches from Fed officials this week could help USD to recover some of its losses.
GBP/USD Exchange Rate Forecast: Will UK Inflation Prompt Further Rate Hike Calls?
Looking to the week ahead for the Pound, a forecast rise to the UK’s rate of inflation could push Sterling higher on Wednesday. Bets on the currency could further increase should investors see it as cause for a further rate hike from the Bank of England (BoE).
A predicted fall to growth in the UK’s private sectors could keep Sterling from climbing higher on Thursday. Should these figures print as forecast then it could dent confidence in the country’s economic recovery.
A number of speeches from Fed policymakers this week could boost USD should they also signal hawkish future policy from the central bank. On the other hand, a forecast fall to US private sector growth on Thursday could limit any potential gains for USD.