Pound US Dollar Exchange Rate News: GBP/USD Climbs amid Improved Risk Appetite

March 30, 2022 - Written by John Cameron

STORY LINK Pound US Dollar Exchange Rate News: GBP/USD Climbs amid Improved Risk Appetite

GBP/USD Boosted by Risk-On Sentiment

The Pound US Dollar (GBP/USD) exchange rate is trading higher as peace talks between Russia and Ukraine progress, underpinning a risk-on mood.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3139, roughly up 0.3% from today’s opening levels.

Pound (GBP) Buoyed as Peace Talks Progress

The Pound (GBP) is climbing against the US Dollar (USD) today as negotiations between Russia and Ukraine make meaningful headway, boosting the risk-sensitive Pound.

On Tuesday, officials gathered in Turkey for the latest round of peace talks.

Ukraine announced it is willing to adopt a neutral status, as ‘the neutrality and non-nuclear status’ are key demands from Russia.

In response, Russia will reportedly scale back ‘military activity’ around Kyiv, though many are sceptical, with the West stating it will judge Russia by its actions only.

Russian Official, Vladimir Medinsky, stated:

‘This is not a ceasefire, but this is our aspiration, gradually to reach a de-escalation of the conflict at least on these fronts.’

GBP investors are hopeful that an end to the conflict may help to ease inflationary pressures in the UK.

However, a dovish speech from Ben Broadbent, the Deputy Governor of the Bank of England (BoE), has capped the Pound’s gains this morning.

Broadbent said:

‘There are lots of unpredictable shocks hitting the economy, things that would otherwise (and often do) move output and inflation around, the appropriate path of interest rates is necessarily unpredictable as well.

‘The Russian invasion of Ukraine has led to substantial rises in the cost of energy and other commodities.

‘As a big net importer of manufactures and commodities it’s doubtful that the UK has ever experienced an external hit to real national income on this scale.’

Should BoE policymakers continue to strike a dovish tone, the shadow cast from the bank’s last policy meeting will continue to inhibit Sterling’s potential in the near-term.

US Dollar (USD) Falls amid Risk-On Mood

The US Dollar (USD) is down against the Pound (GBP) today as peace talks dampen the safe-haven ‘Greenback’.

Following a turbulent few weeks, investors are returning to riskier currencies this morning amid promising geopolitical developments.

On the other hand, rate hike bets for the Federal Reserve’s next meeting may limit USD’s losses today.

The Fed is expected to raise interest rates by 50 basis points at the next two meetings as well as deliver more aggressive action.

Fed policymaker Patrick Harker commented:

‘I have pencilled in seven ... 25-basis-point increases for this year [and] I am open to sending a strong signal with a 50-basis-point increase at the next meeting.’

GBP/USD Exchange Rate Forecast: Will Peace Talks Continue to Progress?

In negotiations between Russia and Ukraine continue to bear fruit, it may boost the Pound US Dollar exchange rate.

This is likely to improve risk appetite and rally demand for Sterling.

An absence of UK economic data for the rest of today will leave GBP susceptible to market sentiment and external factors.

Later today, USD may be buoyed by ADP employment change figures. The data is expected to reveal 450K people were hired during March.

This could bolster expectations ahead of Friday’s more influential non-farm payrolls release.

Furthermore, the final print of US GDP growth rate is set to confirm the US economy expanded by 7.1% in the fourth quarter.

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TAGS: Pound Dollar Forecasts