- Conflicts between Ukraine and Russia, capture the attention of market participants, again.
- Bank of England members in the UK Parliament’s Treasury Committee opposed the “aggressive” tightening of monetary policy.
- GBP/USD Technical Outlook: Failure at 1.3600 caused a move towards 1.3500.
Sterling’s failure to hold above 1.3600 exacerbated a move towards the 1.3550 area as geopolitical angst mounts and dovish language from the Bank of England. At the time of publication, the GBP/USD trades at 1.3551.
Update on the Ukraine crisis in Eastern Europe
Tensions between Ukraine and Russia are rising. What began as a “quiet” day in the financial markets has taken its toll, as the US press through Newsweek expressed that an invasion from Russia could occur within 24/48 hours.
The article said that Ukraine’s president was warned that Russia “will begin an invasion within 48 hours according to US intelligence.” The invasion of Russia would consist of air strikes, cruise missiles, ground invasion and cyber attacks, according to a US intelligence official.
Earlier in the day, BoE officials spoke before the UK Parliament’s Treasury Select Committee on Wednesday. BoE Governor Andrew Bailey said inflation risks are tipped to the upside but remain “two-sided,” warning investors against aggressive bets on future interest rates. At the same hearing, another member who voted for a 50 bps rate hike at the February policy meeting said the decision had been precisely balanced. Another, who also voted for a 50bp hike, said he now sees a “modest” tightening in the coming months.
Therefore, geopolitical anxiety and dovishness from the BoE boosted the dollar’s outlook, weighing on sterling. Also, the GBP/USD’s failure to break the 1.3600 level exacerbated the cable’s downside move, caused by profit taking and selling pressure, as the GBP/USD fell 50 pips.
Meanwhile, the US dollar saw further ebbs as the US Dollar Index, which measures the value of the dollar against a basket of six currencies, rose 0.17% to 96.19.
GBP/USD Price Forecast: Technical Outlook
Over the last two days, GBP/USD ended with losses, although never below the 1.3550 mark. Initially there appeared to be a consolidation before resuming the uptrend, but Wednesday’s price action has fueled expectations of a more significant move lower than estimated.
The first GBP/USD support would be 1.3550. The break of the latter exposes the 50-day moving average (DMA) at 1.3512, followed by the 100-DMA at 1.3502.
Additional technical levels
Source: Fx Street
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