Pound US Dollar Exchange Rate Fails to Recover amid Hawkish US Rhetoric
The Pound US Dollar (GBP/USD) exchange rate is trading downwards today as no new data leaves the pairing open to market shifts, with the Ukraine-Russia crisis ever looming large.
At time of writing the GBP/USD exchange rate is around $1.3031, relatively unchanged from this morning.
Pound (GBP) Remains Vulnerable amid Ukraine Tensions and Dovish Outlook
The Pound (GBP) is trending down against the US Dollar today as lack of fresh economic data leaves Sterling open to shifting market sentiment and a strengthening US Dollar.
With the Bank of England (BoE) softening its language regarding future interest hikes after yesterday’s speech, the GBP/USD exchange rate remains on the back foot as it heads to close the week amid rising inflationary pressures and a souring geopolitical mood.
Tensions in Ukraine continue to deteriorate as reports of a missile strike hitting a railway station in Kramatorsk in eastern Ukraine today. Dozens of civilians are feared killed or wounded as thousands of civilians are thought to have been trying to flee the war-ravaged zone when Russian rockets targeted the railway station.
This comes after the UK announced yesterday that it was preparing a fresh military aid package to be sent to Ukraine, a much-improved package to coincide with the step-up of assistance from the UK and its allies. Prime Minister Boris Johnson and Poland President Andrzej Duda met yesterday to discuss what further action is needed.
“Both leaders agreed that the west needed to accelerate its support to Ukraine in the coming days and go further and faster with the equipment it was supplying,” said Downing Street after the meeting.
The ongoing war in Ukraine will continue to concern investors, with any negativity likely to impact the Pound.
US Dollar (USD) Continues to Gather Strength Against its Peers
The US Dollar (USD) extended its upside against most of its rivals today as risk-aversion continues to sway investors towards safe-haven currencies, as elevated US Treasury bond yields continue to underpin the US Dollar.
The continued hawkish approach by the Fed also helped boost the US Dollar after Wednesday’s release of the Federal Open Market Committee (FOMC) policy meeting minutes.
Expectations that the Fed will tighten its monetary policy at an increased pace pushed the ‘greenback’ to its highest level since May 2020.
Pound US Dollar Forecast: Continued Policy Divergence to Help or Hinder?
With little data to go on until Monday, all eyes will be on risk sentiment surrounding the Ukraine war on influencing the GBP/USD exchange rate. With peace talks not likely to happen anytime soon, and even more sanctions on Russia being proposed, the worsening situation is likely to weigh on the Pound US Dollar.
With the US Dollar appearing to be propped up quite steadily by higher US yields, the inflation combat strategy, and a seemingly strong US economy, the Pound US Dollar could be under increased pressure going forward.