Pound US Dollar Exchange Rate News: GBP/USD Rangebound as Russia Continues Military Action in Ukraine

February 25, 2022 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Rangebound as Russia Continues Military Action in Ukraine

GBP/USD Flat as Russia Invades Ukraine

The Pound US Dollar (GBP/USD) exchange rate is trading in a narrow range today as investors remain wary of geopolitical developments.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3390, with minimal market movement from today’s opening levels.

US Dollar (USD) Directionless as Geopolitical Tensions Remain High

The US Dollar (USD) is muted against the Pound (GBP) today following a market correction from yesterday’s highs.

The US Dollar skyrocketed on Thursday as Russia’s invasion of Ukraine rattled market sand bolstered safe-haven demand.

The Russia-Ukraine war continues to act as the main catalyst for the GBP/USD exchange rate today.

Yesterday evening, US President Joe Biden called his Russian counterpart an ‘aggressor’ who ‘chose this war’ which will ‘end up costing Russia dearly, economically and strategically’.

Biden has imposed a number of sanctions on Russia, including stopping exportations of technology to limit Russia’s military sector, as well as blocking the assets of four Russian banks.

Meanwhile, Federal Reserve policymaker, Christopher Waller, delivered a hawkish tone during his speech last night which has provided the ‘Greenback’ with some support.

Due to ‘alarming’ inflation, Waller made a ‘strong case’ for the March meeting to deliver a 50-basis-point rate hike.

Waller said:

‘I believe appropriate interest rate policy brings the target range up to 1 to 1.25 percent early in the summer.

‘Of course, it is possible that the state of the world will be different in the wake of the Ukraine attack, and that may mean that a more modest tightening is appropriate.

‘[However, the Fed] must respond decisively to the data so as to maintain our credibility that we will bring down inflation.’

Pound (GBP) Rangebound as Geopolitical Uncertainty Prevails

The Pound (GBP) is mixed against the US Dollar (USD) this morning as investors remain wary of the situation in Ukraine.

However, Bank of England’s (BoE), Huw Pill, delivered a hawkish speech yesterday evening which is limiting the Pound’s losses.

Pill stated that he is looking for BoE to reduce inflation in a ‘measured way’ in efforts to protect the ‘growth and employment’ of the UK economy.

On the other hand, BoE Governor, Andrew Bailey, argued earlier this week that markets shouldn’t get ‘carried away’ when aggressively pricing in interest rate hikes.

In front of a parliamentary committee on Wednesday, Bailey said:

‘It's not just wage setting, it's also price setting ... it's both. There is very clearly an upside risk there. The upside risk ... comes through from the second-round effects.’

GBP/USD Exchange Rate Forecast: Will US Manufacturing PMI Bolster USD?

Into next week, the Pound US Dollar exchange rate is likely to be weighed on by US ISM manufacturing PMI for February.

The figures are predicted to increase marginally to 58, showing a slight growth in factory activity following January’s weak reading of 57.6.

Similarly, the US ISM manufacturing new orders for February is also likely to increase which may further boost the ‘Greenback’s demand.

Meanwhile, the Pound may gain some traction from BoE’s consumer credit for January should the forecast increase from £0.8 billion to £1 billion print as expected.

In addition, it is safe to assume the crisis in Ukraine will remain a key driver in the GBP/USD pairing in the near-term.

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TAGS: Pound Dollar Forecasts