- GBP/USD pulled back to the 1.3550 area in recent choppy trading with currency markets mixed as traders assess Russia/Ukraine developments.
- Russia recognized the independence of rebel-held regions in eastern Ukraine and sent in troops on Monday, heightening tensions with Ukraine.
- The UK has already announced sanctions and the EU and US are expected to do the same shortly.
GBP/USD has been under selling pressure on Tuesday, pulling back to the 1.3550 area in recent trading from earlier session highs at 1.3600 to now trade down around 40 pips of 0.3% on the day . G10 forex market trading is spotty and mixed as traders/market participants assess the fallout from Russia’s decision on Monday to recognize the independence of rebel-held territories in eastern Ukraine and subsequently , sign new defense agreements with the regions. Since then, Russian troops have moved on a “peacekeeping” mission into the rebel-held areas of Donetsk and Luhansk. Investors fear this could be a precursor to a broader conflict between Russia and Ukraine, as separatist forces continue to accuse Ukraine’s military of aggression.
UK Prime Minister Boris Johnson recently became the first major Western nation to formally announce sanctions against Russia for what he says is a violation of international law and this may have something to do with the pound’s recent underperformance. sterling In fact, the British pound is currently the worst performing G10 currency of the day and interestingly, other risk sensitive G10 currencies such as the NZD, NOK and SEK have performed very well. Traders are likely to continue to face difficulties navigating irregular and unpredictable trading conditions as further EU and US sanctions are announced and NATO leaders continue to warn of the risk of further Russian aggression against Ukraine. .
In terms of UK domestic fundamentals, BoE Deputy Governor Dave Ramsden was on the wires on Tuesday, sounding cautious about the long-term outlook for policy amid heightened geopolitical uncertainty. Ramsden said the BoE would have to raise interest rates a bit more in the coming months, but warned that the Russia-Ukraine crisis was making it difficult to predict the long-term path of policy.
Later on, the focus will shift to US data with preliminary February Markit PMI surveys at 14:45 GMT ahead of February’s preliminary CB Consumer Confidence reading at 15:00 GMT. The focus will then remain on various statements from BoE members and Fed policymakers speaking over the course of the rest of the week, as well as the second estimate of US Q4 GDP figures on Thursday and US January core PCE inflation on Friday. But geopolitics will remain in the driver’s seat as investors watch events unfold and ponder what Russian President Vladimir Putin’s next move might be.
Additional technical levels
Source: Fx Street
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