- GBP/USD regained positive traction on Wednesday amid subdued USD demand.
- A positive risk tone was seen as a key factor weighing the safe-haven greenback.
- BoE rate hike bets remained supportive, though geopolitical risks might cap gains.
The GBP/USD pair maintained its bid tone through the early European session and was last seen hovering near the top end of its daily trading range, around the 1.3600 mark.
The pair built on the previous day's late rebound from the multi-day low, around the 1.3540-1.3535 area, and gained some positive traction on Wednesday amid subdued US dollar demand. Despite the recent geopolitical developments, the fact that new economic sanctions on Russia were not as bad as feared helped ease the nervousness over the situation in Ukraine. This was evident from a generally positive tone around the equity markets, which undermined the greenback's relative safe-haven status and acted as a tailwind for the GBP/USD pair.
The British pound also drew support from hawkish comments by the Bank of England (BoE) Deputy Governor Dave Ramsden, saying that some further tightening is likely to be appropriate in the coming months. This reinforced expectations for additional interest rate hikes by the BoE. In fact, investors are pricing in another rate hike at the next scheduled BoE meeting that concludes on March 17. This was seen as another factor behind the GBP/USD pair's intraday move up. That said, the upside seems limited amid rising geopolitical tensions.
The risk of an imminent Russian invasion of Ukraine might continue to weigh on investors' sentiment and keep a lid on the optimistic market move. It is worth recalling that Russian President Vladimir Putin upped the ante on Monday by recognizing two breakaway regions in eastern Ukraine as independent entities and allowing troops to enter the area to maintain peace. Moreover, Russia's upper house voted in favour of giving Putin the authority to deploy forces abroad. This should limit losses for the buck and cap the GBP/USD pair, at least for now.
Apart from this, the lack of progress in talks to resolve the problems with the Northern Ireland protocol of the Brexit agreement might further hold back bulls from placing aggressive bets. This makes it prudent to wait for strong follow-through buying before positioning for any further gains amid absent relevant market-moving economic releases, either from the UK or the US. That said, developments surrounding the situation in Ukraine will influence the USD, which, in turn, should provide some impetus to the GBP/USD pair.
Technical levels to watch
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD favours extra retracements in the short term
AUD/USD kept the negative stance well in place and briefly broke below the key 0.6400 support to clinch a new low for the year on the back of the strong dollar and mixed results from the Chinese docket.
EUR/USD now shifts its attention to 1.0500
The ongoing upward momentum of the Greenback prompted EUR/USD to lose more ground, hitting new lows for 2024 around 1.0600, driven by the significant divergence in monetary policy between the Fed and the ECB.
Gold aiming to re-conquer the $2,400 level
Gold stages a correction on Tuesday and fluctuates in negative territory near $2,370 following Monday's upsurge. The benchmark 10-year US Treasury bond yield continues to push higher above 4.6% and makes it difficult for XAU/USD to gain traction.
Bitcoin price defends $60K as whales hold onto their BTC despite market dip
Bitcoin (BTC) price still has traders and investors at the edge of their seats as it slides further away from its all-time high (ATH) of $73,777. Some call it a shakeout meant to dispel the weak hands, while others see it as a buying opportunity.
Friday's Silver selloff may have actually been great news for silver bulls!
Silver endured a significant selloff last Friday. Was this another step forward in the bull market? This may seem counterintuitive, but GoldMoney founder James Turk thinks it was a positive sign for silver bulls.