Sterling (GBPUSD=X) has risen against the dollar for the first time in five days moving just above the pre-Brexit lows it touched during the previous sessions as the need for safe havens wanes.
The pound surged 0.5% against the greenback to $1.316 as the safe haven’s rally triggered by Russia’s invasion of Ukraine paused as spot gold (GC=F) price stabilised.
The metal neared a record high on Wednesday, rising 2.3% to $2,040 a troy ounce, before steadying to $2,000 (£1,520).
Gold’s movement came as bitcoin (BTC-USD) increased in value in a surprise twist on the eve of Washington’s planned regulatory overhaul of the crypto industry.
The main crypto’s market capitalisation jumped 6.5% to $1.91trn as US president Joe Biden is poised to sign a highly anticipated executive order. It was up 0.8% to $42,213 at the time of writing.
Meanwhile, sterling, which has been propped up against the euro (GBPEUR=X) in recent weeks thanks to differing monetary policies from the European Central Bank (ECB) and the Bank of England (BoE), slipped 0.2% to 83.39p against the common currency.
The euro (EURUSD=X) also staged a comeback against the dollar after dipping below the key levels last week to under $1.10 for the first time since May 2020. It was up over 0.6% against the dollar at the time of writing.
The ECB is due to make its decision on interest rates on Thursday, while the BoE’s Monetary Policy Committee meets next week.
Both central banks are facing the challenge of combatting rising inflation while the conflict in Ukraine also threatens to dent global growth.
It comes after the pound sank to its lowest level against the dollar since December 2020 on Monday. It fell as low as low as $1.314, a level not seen since before Britain finalised its exit from the European Union.
The greenback has been the favoured currency of the world, especially as the Federal Reserve took a more hawkish stance recently, signalling an interest rate hike in March as inflation soars above the desired 2% rate in the US.
Fed chair Jerome Powell said last week: “I am inclined to propose and support a 25 basis-point rate hike,” Powell added. “To the extent that inflation comes in higher or is more persistently high than that, then we would be prepared to move more aggressively by raising the federal funds rate by more than 25 basis points at a meeting or meetings.”
Analysts are expecting a prolonged financial and commodity market volatility as the war enters the second week after Russia responded to import bans by imposing an export ban on some goods and raw materials.
“This is likely to be typical of market moves from here on in as the ebb and flow of headline risks continues to pull markets this way and that,” said Michael Hewson, chief market analyst at CMC Markets.
The Kremlin is a major exporter of gas, grain and metals, and commodity prices have soared since the invasion of Ukraine on the prospect of supply disruptions, sanctions and counter-measures.
Wheat, aluminium (ALI=F), palladium (PA=F) and nickel prices climbed after the order was released.
Nickel prices in China soared to a record high after trading of the commodity was suspended in London. The price of the metal, which is used in stainless steel and lithium-ion batteries, rose 17% to hit a record of Rmb267,700 ($42,381, £31,261) a tonne on Wednesday.
