GBP/USD bounces off YTD low, lacks follow-through amid Russia-Ukraine jitters
- GBP/USD dropped to a fresh 2022 low on Monday amid a further escalation of the Russia-Ukraine war.
- The global flight to safety continued benefitting the safe-haven USD and exerted downward pressure.
- The USD bulls took a brief pause and assisted the pair to rebound over 50 pips from the daily low.
The GBP/USD pair recovered its early lost ground from the fresh YTD low and climbed to the top end of its intraday trading range, around the 1.3225 region in the last hour.
The pair added to last week’s losses and witnessed some follow-through selling during the early part of the trading on Monday amid the underlying strong bullish sentiment surrounding the US dollar. The worsening situation in Ukraine continued weighing on investors’ sentiment, which was evident from an extended sell-off across the global equity markets. This, in turn, boosted demand for traditional safe-haven assets and pushed the USD to its highest level since May 2020.
In the latest developments, Russian forces intensified attacks on Ukraine and increasing Western sanctions also did little to deter Russia’s aggression. Moreover, Russian President Vladimir Putin warned that the war in Ukraine would continue. Apart from this, Friday’s mostly upbeat US monthly employment details further acted as a tailwind for the greenback. This was seen as a key factor behind the GBP/USD pair’s decline to sub-1.3200 levels for the first time since December 20.
The headline NFP print showed that the US economy added 678K jobs in February, smashing consensus estimates pointing to a reading of 400K. Adding to this, the previous month’s reading was revised higher to 481K from 467K reported earlier and the unemployment rate fell more than anticipated, to 3.8% from 4.0% in January. This, to a larger extent, helped offset disappointing wage growth data, showing that Average Hourly Earnings remained flat during the reported month.
The USD bulls, however, took a breather amid expectations that the Fed would adopt a less aggressive policy stance to combat stubbornly high inflation in the wake of the recent geopolitical developments. This, along with retreating US Treasury bond yields, capped gains for the USD and assisted the GBP/USD pair to find some support at lower levels. That said, any meaningful recovery still seems elusive as the market focus remains glued to escalating the Russia-Ukraine conflict.