Pound US Dollar Exchange Rate News: GBP/USD Falls as Russia-Ukraine War Rages On

February 28, 2022 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Falls as Russia-Ukraine War Rages On

GBP/USD Stumbles as Geopolitical Uncertainty Continues

The Pound US Dollar (GBP/USD) exchange rate is slipping today as Russia continues to escalate the war against Ukraine, stoking risk-off sentiment.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3380, down roughly by 0.2% from today’s opening levels.

US Dollar (USD) Gains Ground as Russia-Ukraine War Escalates

The US Dollar (USD) is rising against the Pound (GBP) today amid geopolitical anxieties which are steering investors towards the safe haven currency.

As Russia’s invasion of Ukraine intensifies, and the West response by stepping up its sanctions, skittish investors are flocking to the ‘Greenback’.

However, the situation has caused pressure on the Federal Reserve, reducing the likelihood of the bank aggressively raising interest rates at its next meeting.

Last week, markets dramatically scaled back their expectations for a March rate hike, USD investors are now largely priced in for a 25 basis point hike instead of the previously expected 50bps.

Jim Paulsen, chief investment strategist at the Leuthold Group, said:

‘I’m not so worried about whether they do 50 [basis] points out of the gate or not. But I also think they shouldn’t overdo it here.

‘You can do 25, and if you want to do another one soon, you can do it, rather than add additional disruption or uncertainty.’

Further capping USD’s appeal are hopes for peace talks between Ukrainian and Russian officials expected to take place on the border with Belarus today.

Zelenskyy said:

‘I do not really believe in the outcome of this meeting, but let them try so that later not a single citizen of Ukraine has any doubt that I, as President, tried to stop the war, when there was even a small, but still a chance.’

If a ceasefire is not brokered then it’s likely the US Dollar could quickly push higher again.

Pound (GBP) Faces Headwinds as Geopolitical Tensions Weaken Rate Hike Bets

The Pound (GBP) is dropping against the US Dollar (USD) this morning as an absence of UK data today has left the Pound vulnerable to market volatility.

Similarly to the Fed, the Bank of England (BoE) may also deliver a more cautious rate hike amid the Russia-Ukraine war.

In an effort to fight Russia’s unprovoked attack on the sovereign state, the UK government announced further sanctions earlier today.

These includes cutting Russia ‘from the international financial system for as long as this conflict persists.’

BoE Governor, Andrew Bailey, said:

‘The Bank of England continues to take any and all actions needed to support the Government’s response to the Russian invasion of Ukraine.

‘We welcome the steps taken today by the UK Government, in coordination with EU and US authorities, as an important and powerful demonstration of the UK’s commitment to the international rule of law.’

GBP/USD Exchange Rate Forecast: Will USD be Boosted by PMI Figures?

Looking ahead, with the Ukraine crisis continuing to dominate headlines, the Pound US Dollar exchange rates may remain vulnerable in the near-term.

On the data front, the US ISM manufacturing PMI for February is likely to weigh on the GBP/USD exchange rate.

The figures are predicted to print at 58, up from January’s 57.6, which may bolster the ‘Greenback’s potential, should the data reach market forecasts.

Similarly, February’s ISM manufacturing new orders may also offer USD some support, with the figures expected to increase slightly from 57.9 to 58.3.

Meanwhile, the Pound may be boosted by January’s BoE consumer credit which is forecast to increase from £0.8 billion to £1 billion.

Moreover, Sterling will also be influenced by speeches from BoE policymakers, Michael Saunders and Catherine Mann.

Should they strike a broadly dovish tone the Pound may fall.

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