British Pound to USD was in the red on Friday, closing at 1.3590 levels. High inflation and expectation of another rate hike keep the GBP/USD above 1.3550.
The British Pound to Dollars closed just below the 1.3600 level last week. The Pound to US Dollar currency pair shot up on Thursday to 1.3640 as high inflation figures disturb the economy. High inflation may bring another hike in policy rates from the Bank of England. The expectation of another rate hike keeps the British Pound to USD higher.
The Euro to British Pound currency pair in the foreign exchange market is moving towards a two-year low at 0.8328.
GBP/USD Resilient to Ukraine Tension
GBP/USD slipped to 1.3167 levels in December 2021. The British Pound to USD recovered from these levels in 2022.
The recent conflict between Ukraine and Russia is troubling the Sterling again. The partial withdrawal of troops at the Ukraine border saw the Sterling surging higher on Thursday. But trouble escalated at the border again, sending the Sterling tumbling on Friday. The British Pound to USD is resilient to geopolitical tension and slipped marginally.
Troops at the Ukraine border troubles the global markets again. There is escalating violence in Eastern Ukraine. Earlier, Russia partially withdrew its military troop from the border. It caused much relief, and the forex markets surged positively. But mass troops gather again at the border, and signs of violence across certain regions in Ukraine have brought down the British Pound to USD lower on Friday.
Top officials from the US and Russia will meet next week. Talks will resume bringing a solution to the geopolitical uncertainty. Talks to be held between Russian Foreign Minister Sergey Lavrov and US Secretary of State Anthony Blinken may deescalate problems.
Russia pledged to withdraw troops but failed to keep up its word. On Thursday, Russia pressed more military forces across the Ukraine border.
Bank of England Hikes Interest Rate
The Bank of England hiked rates from 0.25% to 0.5% in the first week of February 2021. High energy bills have pushed the Bank of England to hike rates. But high inflation continues to haunt the British economy and the British Pound to USD currency pair. Analysts expect BOE to hike rates again to 0.75%.
The final Manufacturing PMI rose to 57.3 from 56.9. There is good industry expansion in the country, showing economic health. Final Services PMI shows improvement from 53.3 to 54.1.
Bank of England has set a target to keep inflation at 2%. High inflation has made the central bank hike the interest rate from 0.25% to 0.50%.
Currencies React to Ukraine Troubles
It was a slide across global currencies on Friday.
Safe-haven currencies like the US Dollar, the Japanese Yen, and the Swiss Franc were trading positively on Friday. The Australian Dollar, the New Zealand Dollar, and the Canadian Dollar slipped to support levels. Investors in the foreign exchange are jittery over the Ukraine border tension.
Investors are moving to bonds and other safe assets like gold. Gold is at 13-month highs. The US 10-year rates are at 2% levels.
If Russia continues to trouble Ukraine, the British Pound to USD may slide further. The Euro will also be under pressure with the Russian troops at the border.
GBP/JPY Moves Within a Tight Range
The British Pound against the Japanese Yen shows consistent movement for the past two weeks trading within a close range. The GBP/JPY currency pair closed at 156.29 on February 18, 2022. It is moving higher towards the levels last seen in June 2016.
A move above ¥157.30 will signify a bull move, while a decline below ¥157.77 will signify a down move. The risk-sensitive currency pair may fall if the geopolitical tension continues next week. If talks between the two major powers bring a positive outcome, the GBP/JPY currency pair will trade higher.
The Japanese Yen is a safe-haven currency that investors in the forex markets prefer to keep their investments.
EUR/GBP Slides Lower
The Euro shows strength even when fear about the Ukraine crisis exists. Analysts expect the ECB to hike rates by the end of 2022. But, the ECB president hints that a rate hike may not occur for now.
The Euro to British Pound touched a high of 0.8479 in Februar7 but closed at 0.8328 on Friday, February 18, 2022. The Euro to Pound today slid 1.7% in this duration. The Euro to British Pound is trading at levels last seen in February 2020.
The Ukraine crisis may cause a shortage in energy supply to the Eurozone, which may cause prices to shoot up. The virus surge is causing panic in various regions of Europe.
US Dollar Gains Strength
The US Dollar gained rapidly on Friday to 96 levels. The Fed may hike interest rates by 50 bps soon, expect analysts.
The US Dollar rose to 97.44 in January 2022. In February, the US Dollar rose to 96.43 on February 14.