GBP/USD
Over the course of these past few weeks, it is evident that the rate is trapped in a very tight trading region, on the brink of exceeding recent lows and therefore printing levels not seen since November 2020. However, the Pound has found the legroom to initiate a slight climb against the Dollar today, but it is clear that this movement is being met with fierce headwinds. The Pound is likely finding a chance to capitalise as markets digest the Fed meeting yesterday in which it was announced the Central Bank is looking to hike interest rates by 0.5% at least once more this year. This announcement did not provide too much impetus to the Dollar as it has already been heavily priced into the market. Furthermore, the Dollar is likely finding some support as many global nations, including the US and UK, have drawn up and imposed new sanctions on the Russian economy. The UK administration has imposed an outright ban on all new outward investment into the country, reported Reuters. Adding to that, the UK has also announced an asset freeze on Russia’s Sberbank and Credit Bank of Moscow, which hold more than one-third of Russia’s total banking assets. With this in mind, it may be likely that The British Pound remains under pressure against the Dollar and other major currencies as the UK economy continues to struggle in this period.
GBP/EUR
The Pound continues its steep uphill climb in strong fashion, making for a 3-upwards trend placing it neatly back into the region it has been trading at for the majority of 2022. It is unclear how much steam the Pound still has in this upwards shift as many nations have now placed a fresh set of sanctions on Russia. This includes the UK placing a full asset freeze on some of Russia’s largest banks and ending all outward investment into Russia, totally £11 Bn in 2020. This may place a cap on the Pounds gains as the economic decline linked to the war in Russia has already taken a toll in the UK economy in the form of surging prices, exacerbating the current cost of living crisis. As for economic data, the UK is once again particularly quiet, with only a BoE speech worth noting. As for the Eurozone, an ECB meeting will occur around midday which doesn’t usually excite markets too much but given the ECB’s recent dovishness, any surprise deviation from their current tone will likely provide the Euro with a large boost.
Published by Frank Brightman (07/04/2022)