• The pair was subject to risk due to the Ukraine crisis, surge in commodity prices and strong US job data.

GBP/USD has been moving sideways since the beginning of US trade. It is stuck in a 1.3200 to 1.3240 range, but it cannot recover to pre-US labour data levels above the 1.33250 mark. The pair trades at 1.3220 with daily losses of 0.9%. This would put it on track to lose 1.4% per week. This would be the most severe such weakness since November. However, it is still a small loss compared to EUR/USD's greater than 3.0% weekly losses. The UK economy is seen as less vulnerable to the fallout of the Ukraine war versus that of the Eurozone. GBP also has the advantage of having higher yields than the euro, and a central banking that plans to raise interest rates soon (for now).

While this has protected sterling from the same underperformance as the euro it hasn't been enough to stop the rot in the buck and prevent cable sliding below its earlier weekly 1.3270-1.3430ish range. Two things make the US currency stand out against GBP. First, it is a safe-haven currency, unlike sterling, which means that GBP/USD was affected by this week's volatile equity markets. The BoE has a head start against the Fed, having started its hiking cycle at end of last year. However, traders believe that US rates will soon surpass UK rates. The Fed Chair gave guidance this week that the Fed's hiking cycles would begin in the latter part of this month with a 25bps increase and continue throughout the year.

Powell noted that Powell believes the pace of the hike could be accelerated if inflation does not slow down as predicted later in the year. This is much more cautious than the BoE guidance which stated last month that they see a "modestly" hiking cycle. Geopolitics, commodities, and risk appetite are key drivers of GBP/USD next week. However, the BoE/Fed divergence theme will also be important. The US Consumer Price Inflation data from February will be the main event. Friday's UK GDP report, which is likely to be negative, will not get as much attention due to markets revising growth outlooks following recent geopolitical developments.