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Pound US Dollar Exchange Rate News: GBP/USD Rises amid Risk-On Mood

April 20, 2022 - Written by John Cameron

GBP/USD Rises amid Risk-On Sentiment

The Pound US Dollar (GBP/USD) exchange rate is trading slightly higher amid improving risk appetite.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.3037, roughly up by 0.3% from today’s opening levels.

Pound (GBP) Climbs as Risk-On Sentiment Returns

The Pound (GBP) is trending higher against the US Dollar (USD) as a risk-on sentiment returns.

This comes as humanitarian corridors are opened in Mariupol, enabling women, children, and the elderly to escape the conflict.

However, Ukrainian officials remain wary of Russian action.

Deputy Mayor of Mariupol, Sergei Orlov, said:

‘Do not believe in any words from Russia. It would be good if they allowed civilians to leave the Azovstal, but they didn’t allow this for 50 days, why should they allow this now?’

According to Serhiy Volyna from the 36th Separate Marine Brigade, ‘the enemy (Russia) is outnumbering us (Ukraine) 10 to one.’

Meanwhile, UK political uncertainty is capping GBP’s gains.

Boris Johnson was recently fined for breaking lockdown rules during the pandemic. Yesterday, Johnson apologised for his actions and a motion has been tabled for Thursday to debate whether Johnson knowingly misled parliament.

Liberal Democrat leader Sir Ed Davey has implored Conservative MP’s to ‘do their patriotic duty’ and oust Johnson from his position of power.

Davey continued:

‘The country cannot afford a Prime Minister who breaks the law and lies about it, especially when families are facing a cost-of-living crisis. Johnson has taken the British people for fools for far too long.’

This has revived concerns over the future of Johnson’s premiership, with GBP investors fearing that additional fines could still force the PM out of office.

US Dollar (USD) Slips amid Modest Sell-Off

The US Dollar is edging down against the Pound (GBP) this morning as demand for the safe-haven currency has been undermined by a prevailing risk-on mood.

Meanwhile, due to rising US inflation – having reached 8.5% in March – the Federal Reserve is expected to hike interest rates by 50-basis points at the next meeting.

In turn, US Treasury yields remain strong, and this is limiting the ‘Greenback’s losses.

USD was provided with additional support after policymaker, Charles Evans, struck a hawkish tone yesterday, improving rake hike bets.

Evans continued:

‘If inflation for some reason began to re-accelerate that would be a cause of great concern.’

Evans suggested interest rates may go ‘beyond neutral’, reaching 2.25% and 2.5% by the end of the year which may aid USD’s appeal today.

GBP/USD Exchange Rate Forecast: Russia-Ukraine War to Weigh on Sterling

Looking ahead, Russia’s invasion of Ukraine is likely to continue driving volatility in the Pound US Dollar exchange rate.

If Russia attacks the humanitarian corridors, distrust between Russia and Ukraine is likely to mount.

In turn, this may dampen hope for a negotiated end to the war, with fears of a prolonged conflict potentially weakening Sterling

Looking towards the end of the week, Bank of England (BoE) Governor, Andrew Bailey, is set to speak at this week’s IMF/World Bank meetings. Will a cautious outlook from Bailey drag on the GBP/USD exchange rate?

Similarly, Fed Chair Jerome Powell is expected to deliver a speech on Thursday. Should Powell provide a hawkish stance, it may support the ‘Greenback’.

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