- First Signs of a De-Escalation Trade, Outlook Remains Highly Uncertain
- GBP[2]/USD[3] Client Sentiment Data Signals a Bearish Outlook
First Signs of a De-Escalation Trade, Outlook Remains Highly Uncertain
Aside from the US announcing that it will ban oil[4] imports from Russia, who were also partly joined by the UK. The main headline overnight had been reports that the Ukrainian President is no longer insisting on NATO membership, which had been among Russia’s key reasons for invading Ukraine. Additionally, the Ukrainian President also hinted that he was open to a compromise on the status of two breakaway pro-Russian territories. In turn, today’s relief rally appears to be the first signs of a de-escalation trade with equities notably firmer, meanwhile gold[5] and oil[6] prices are under pressure. However, as has been made abundantly clear, headline risk remains elevated with market sentiment able to change on a whim from headline to headline. Moreover, while talks perhaps maybe showing slight signs of a moving in the right direction, gauging the timing of a breakthrough remains incredibly uncertain.
That being said, while the Euro[7] has seen a modest reprieve with the single currency edging back towards the 1.10 handle, the bias remains bearish on rallies. The same can be said for the Pound, which will struggle in an environment of stagflation. In light of the current backdrop, the Bank of England’s most recent inflation forecast already appears outdated amid the latest surge in oil prices. For now, short-covering and technical support in the form of the 200WMA is underpinning GBP/USD, but risks remain lower for a test of the 1.3000 handle.
GBP/USD Chart: Weekly Time Frame
Source: Refinitiv
GBP/USD Client
