Sterling moves higher as dollar dips

The British pound is in positive territory, as the US dollar has retreated against the major currencies for the first time in five days. GBP/USD is trading at 1.3169 in the North American session, up 0.52% on the day.

The US dollar has had its way with the pound in recent sessions, but GBP/USD has reversed directions today. We are seeing a buy-the-dip move, which has boosted equities and led to a US bond selloff, with yields falling. The dollar index has fallen sharply to 98.02, down 1.02% and the US dollar outlook is suddenly not looking so bullish.

As goes Ukraine, so do the markets

Market direction has been shaped to a great extent by the crisis in Ukraine and the markets continue to react as developments unfold. On Thursday, the foreign ministers of Russia and Ukraine are scheduled to meet in Turkey, and if progress is made towards a ceasefire in the fighting, risk appetite would find some traction and we could see a rotation out of US dollars. Conversely, if the talks collapse and Russia intensifies its attacks, the safe-haven dollar would become more attractive to investors.

The Fed is poised to commence its rate lift-off at next week’s meeting, likely by a quarter-point. What happens after that has become very unclear, with the extreme turbulence we are seeing. There is a full-blown war in Europe, commodity prices are soaring, and oil has rocketed above 120 dollars a barrel. This nasty recipe could lead to stagflation, which means that Fed policymakers will have to show an abundance of caution moving forward – we can expect a slower pace of rate hikes this year than had been anticipated just a few weeks ago.


GBP/USD Technical

  • GBP/USD has broken through resistance at 1.3146. Above, there is resistance at 1.3291
  • There is support at 1.3057 and 1.2912

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Market Analyst at OANDA
A highly experienced financial market analyst with a focus on fundamental analysis, Kenneth Fisher’s daily commentary covers a broad range of markets including forex, equities and commodities. His work has been published in several major online financial publications including, Seeking Alpha and FXStreet. Based in Israel, Kenny has been a MarketPulse contributor since 2012.
Kenny Fisher

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