GBP/USD depressed around 1.3450 amid geopolitical tensions
- The GBP/USD plunges near 100-pips as risk-sentiment worsens in the day.
- Tensions in Eastern Europe, Fed tightening monetary policy conditions, and UK political issues weighed on the GBP.
- Although expansionary, IHS Markit Manufacturing PMI’s showed the impact of the Omicron variant.
At the time of writing, the British pound plunges during the New York session, trading at 1.3456, down almost close to 100-pips, as the Russian – Ukraine crisis escalates, alongside the Federal Reserve monetary policy meeting, which the US central bank could use to set the guidelines regarding tightening policy conditions.
In the meantime, the US stock indices get whipped out, losing between 1.67% and 2.51%, while in the FX market, the low yielders’ Japanese yen, Swiss Franc, the euro, and the greenback, are the gainers of the session.
UK IHS PMI came worse than expected
Early in the European session, the UK’s IHS Markit PMI for January came worse than expected. The Manufacturing PMI came at 56.9 vs. 57.6 expected, while the Services index was at 53.3 vs. 54.0 expected. The composite PMI came at 53.4 vs. 54.0, falling for the third straight month to the lowest since February 2021.
In the meantime, pressures on PM Boris Johnson keep mounting after the so-called Downing Street No 10 “party gate” came known by December of 2021. Johnson’s approval ratings are plunging, and reported by CNN, “there appears to be a growing sense among some parts of his ruling Conservative Party that he is becoming a liability.” In the last week, two polls suggested that two-thirds of voters want him to resign.
Putting this aside, Brexit jitters about the North Ireland protocol and article 16 would further pressure the weakened British pound, which has fallen in the month 0.58%.
Meanwhile, the US economic docket featured the IHS Markit PMI’s. The Manufacturing index came at 55.0 vs. 57.7 in December, while the Services index dropped seven points to 50.9 from 57.6. As a result, the composite hit the 50.8 mark, down from 57.0.
Therefore, GBP/USD trader’s focus is on the Federal Reserve monetary policy meeting, which begins on Tuesday. The monetary policy statement is released on Wednesday, followed by the Fed’s Chair Jerome Powell press conference.