GBP/USD Hold on To Modest Rebound Gains Close to 1.3000, Lacks Follow-Up
Tough Times for European Currencies
The GBP/USD currency pair clung desperately to its average recovery profits in the early North American session, and it was observed trading a few points under the daily highs in the region of 1.3000.
After defending the major 1.3000 psychological benchmarks, the GBP/USD currency pair showed an intraday growth from the lowest point since November 2020 it had touched in the early hours of Monday in the midst of a relative US dollar weakness.
GBP/USD price chart. Source TradingView
The renewed hope for a diplomatic solution to the ongoing war between Russia and Ukraine helped to raise the market risk sentiments and reduced the demand for conservative safe-haven commodities, including the US dollar.
Less Vibrancy in the General Market
Market optimism continued to be capped as the risk of deeper escalations in the Eastern European crisis stared everyone in the face. Russia recently bombarded a large Ukrainian military base near Ukraine’s border with Poland, which is a member of the North Atlantic Treaty Organization (NATO). In addition to all these, a spokesman from the Kremlin announced on Monday that all of Russia’s drawn plans over Ukraine are going to be completely fulfilled in the time frame set for their actualization.
In other developments, increased US Treasury bonds yields became a tailwind in favor of the US dollar and put a proper lid on a more meaningful increase in the GBP/USD pair relation. The latest huge raise in the price of commodities has continued to heat up concerns over a significant inflation shock in the coming days, which confirms speculations for the pending beginning of the monetary policy of the Federal Reserve. It consequently drove the US bond yield to higher levels.
A lot of investors are being reluctant to bet aggressively before major central bank events and the accompanying risks. Major events to look out for this week are the Federal Open Market Committee meeting scheduled to end on Wednesday and the Bank of England’s monetary policy decision scheduled to be published on Thursday.
While the wait is on, traders are expected to watch out and take directions from events surrounding the Ukraine crisis, the US dollar, and its price dynamics, as well as Tuesday’s publication of the United Kingdom’s employment report.
It should be noted that the Bank of England is preparing to have its third 25 basis points interest rate increase on Thursday during its monetary policy meeting. The Bank of England had already raised its interest rates two times in quick succession, first in December 2021 and then in February.