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Pound US Dollar Exchange Rate News: GBP/USD Directionless amid Risk-On Trade

April 28, 2022 - Written by John Cameron

GBP/USD Directionless amid Risk-On Sentiment

The Pound US Dollar (GBP/USD) exchange rate is mixed as risk on sentiment places pressure on the safe haven ‘Greenback’.

At the time of writing, the GBP/USD exchange rate is trading at approximately $1.2543, with minimal movement from today’s opening levels.

US Dollar (USD) Rangebound as Risk-On Mood Prevails

The US Dollar (USD) is trading in a narrow range against the Pound (GBP) this morning as a risk on sentiment undermines demand for the safe-haven USD.

In spite of this, the ‘Greenback’ remains at multi-year highs as USD investors remain optimistic that the Federal Reserve will hike interest rates at the next meeting.

Next week, the Fed is expected to raise interest rates from 0.5% to 1%, with additional half-percentage increases likely to follow in June and July.

The Fed’s embarking on a more aggressive tightening cycle comes as the US central bank seeks to tame domestic inflation.

Furthermore, any downside in the US Dollar is likely to remain limited so long as elevated local coronavirus cases threaten to plunge more of China into lockdown. In turn, supply chain bottlenecks are likely to resume, driving fears of global growth stagnating in the near future.

Bobby Djavaheri, President of Yedi Household Appliances, said:

‘Things are getting crazy again. Everything is halted. There are closures this very minute that are adding to the supply-chain nightmare we’ve been experiencing for two years.’

Pound (GBP) Subdued as Putin Warns of ‘Lightning Fast’ Retaliation

The Pound (GBP) is muted against the US Dollar (USD) as Russia’s invasion of Ukraine continues.

On Wednesday, Russia cut gas supplies to Poland and Bulgaria as Vladimir Putin demanded all ‘unfriendly’ countries pay for services with roubles.

In turn, the EU have said the move reveals Russia’s ‘unreliability’ as a provider and has accused Putin of ‘blackmail’.

This is worrying GBP investors however as further cut-offs may lead to a gas shortage and increase costs, exacerbating the UK’s cost of living crisis.

Moreover, Putin has warned of ‘lighting fast’ retaliation to any country which ‘interferes’ with his current ‘special military operation’.

Thus far, the UK has sent over 5000 anti-tank missiles to Ukraine and is actively ‘supporting Ukraine’s sovereign integrity’.

UK Defence Secretary Ben Wallace said:

‘…First and foremost, let's get Russia out of where they are now in its invasion plans and help Ukraine resolve and actually remember the Minsk agreement, which Russia has basically ripped up, was all about trying to resolve those two occupied territories.

‘But the key thing is to continue to support Ukraine's sovereign integrity and their ability to defend themselves’.

GBP/USD Exchange Rate Forecast: US Data Dump to Impact ‘Greenback’

Looking ahead, the Pound US Dollar exchange rate is likely to be influenced by the latest US GDP reading, to be published later this afternoon.

The US economy is expected to have expanded by 1.1% during the first quarter. This is a drastic slowdown from the 6.9% growth seen in the previous quarter and could limit USD demand.

On the other hand, an absence of UK economic data for the rest of this week’s session is likely to leave GBP exposed to other factors.

The UK’s cost of living crisis, political uncertainty and the conflict in Ukraine are likely to be key influencers of GBP exchange rates.

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