- GBP/USD bears are moving in as risk sours over Ukraine.
- Attacks continue for another night with no sign of a cease-fire.
There are explosions in Kyiv being reported which is hurting risk sentiment in Asia. nevertheless, GBP/USD is still higher by some 0.15% but is struggling to convince in the correction that has started to decelerate in the face of risk aversion and the Ukraine crisis. At 1.3392, the price is below the 1.3394 highs that were made following a recovery from 1.3366 lows.
On the worst day since March 2020 as investors moved to safe havens when Russian forces invaded Ukraine, the pound fell 1.8%. This was the lowest since December 22.
Ukraine reported columns of troops crossing over from Russia and Belarus, taking up positions on the coast from the Black and Azov seas. The Russian assault is being fought on several fronts after it attacked from the east, north and south on Thursday.
The Kremlin launched the offensive in the early hours of the morning, shortly after President Vladimir Putin declared war in a dramatic televised address. He threatened any country attempting to interfere with "consequences you have never seen".
Ukraine's President Volodymyr Zelensky has since vowed to continue fighting while nations such as the US are sending troops to the Eastern flank of Europe in fears of overspill into the NATO allies.
Volodymyr Zelensky "a new iron curtain" was falling into place and his job was to make sure his country remained on its western side.
The EU, UK and the US have imposed new sanctions in order to cripple the Russian economy. They are the most significant deployment of economic penalties against a country with Russia's economic size and integration in global markets.
Ukrainian leaders and some US lawmakers have urged US president Joe Biden to go even further with the sanctions to punish Moscow and Putin for the attack on Ukraine. However, they will not prevent a protracted crisis and Russia may not start to feel the full effects of the sanctions for weeks to come.
Meanwhile, domestically, British finance minister Rishi Sunak said he had spoken with Bank of England Governor Andrew Bailey on Thursday to ensure financial stability after Russia's invasion.
BoE in focus
Also, BoE's Chief Economist Huw Pill provided more of the same dovish rhetoric.
He argues that the central bank would seek to bring fast-rising inflation down in a "measured way" and one "that doesn't disturb the rest of the economy". The UK rate market had already scaled back expectations in recent days for a 0.50 point hike following less hawkish comments from BoE Monetary Policy Committee officials.
The Old Lady's Governor Andrew Bailey said on Wednesday that markets should not get carried away about the likely scale of interest rate rises, while policymaker Silvana Tenreyro said she saw the case for further modest tightening.
''Money markets are pricing in a 55% chance of a 50 basis point rate hike from the BoE in March and fully pricing a rate increase of 125 bps by year-end,'' Reuters reports.
