The Pound US Dollar (GBP/USD) exchange rate dropped over the course of last week. A fragile risk environment kept the currency pair suppressed however amid the war in Ukraine, propelling GBP/USD to hit a three-week low on Friday.
What’s Been Happening: Ukraine Accuses Russia of War Crimes as Conflict Continues
The Pound struggled to make any headway last week as global risk appetite continually retreated. The conflict in Ukraine weighed upon Sterling after accusations of civilian massacres in the town of Bucha.
Reports emerged on Sunday of what Ukraine’s President Volodymyr Zelenskiy described as ‘war crimes’. Russia has repeatedly denied the allegations.
A gloomy forward outlook for the UK’s economy likely also kept GBP muted last week. Analysts at Deutsche Bank warned that the UK could face a recession later this year.
The US Dollar (USD) benefitted from a risk-averse market mood last week as investors continued bets on the safe-haven ‘Greenback’. A persistently hawkish stance from the Federal Reserve also helped boost USD last week.
The release of minutes from the Fed’s latest meeting further bolstered the currency. The minutes indicated a strong possibility of 0.5% interest rate hikes in the future.
Weekly Highlights
- Ukraine-Russia Conflict
The war in Ukraine is likely to continue to dominate risk appetite in the coming week. The possibility of a renewed Russian offensive in the east of Ukraine could prompt further risk-off trading.
- US & UK Inflation
Inflation in March is forecast to have risen again in both the UK and US. Will a jump in UK inflation weaken the Pound as a result of cost-of living concerns?
- UK Employment Data
The UK’s latest jobs report could help to cushion the rise in domestic inflation, if wage growth accelerated as forecast in February.
GBP/USD Forecast
The Pound is likely to continue to be rocked by the Ukraine-Russia conflict and its effect on risk sentiment.
For the US Dollar, multiple speeches from Fed policymakers could see the currency climb higher. Additionally, a forecast rise to US retail sales on Thursday could also boost USD.