GBP/USD shoots higher in a bout of risk-on as Ukraine confirms not insisting on NATO membership

• GBP/USD bulls step in as there could be a light at the end of the tunnel in terms of the Ukraine invasion. 
• Ukraine's president, Volodymyr Zelensky, is open to dialogue and NATO is not on the agenda. 

GBP/USD is back in the green after rallying from 1.31 the figure and now on the march towards 1.3130. A phase of risk-on has happened in recent trade following remarks from Ukraine's president, Zelensky, that Ukraine was not about to join NATO, reminding the world that Ukraine was not regarded as being ready to join NATO. 

"I have cooled down regarding this question a long time ago after we understood that ... NATO is not prepared to accept Ukraine," Zelensky said in an interview aired Monday night on ABC News.

This is essentially a rehash of what is already known so it may not have a lasting impact. There are a lot of criteria for NATO membership and Ukraine didn’t really meet any of those. Having said that, Zelensky has also said he is open to "compromise" on the status of two breakaway pro-Russian territories that President Vladimir Putin recognized as independent just before unleashing the invasion on February 24. Overall, Zelensky is open to dialogue.

"I'm talking about security guarantees," he said. He said these two regions "have not been recognized by anyone but Russia, these pseudo republics. But we can discuss and find the compromise on how these territories will live on."

Central banks in focus

Meanwhile, the Bank of England policymakers are set to enter the blackout period ahead of an interest rate decision on March 17.

We expect a 25bps hike then, but so do markets and economists, so the focus will be on how quickly the bank will increase rates (continue with back-to-back hikes?) and how high it is willing to take the bank rate," analysts at Scotiabank said. Money markets are currently fully pricing in a 25 basis point rate increase at the BoE's March meeting.

As for the US dollar, we are in the blackout period of Federal Reserve speakers ahead of next week's Federal Reserve meeting. ''Between the ongoing risk-off impulses and the Fed outlook for tightening, we believe the dollar uptrend remains intact,'' analysts at Brown Brothers Harriman said. 

''Recent comments support our view that the Fed is on track to start the tightening cycle with a 25 bp hike March 16.  WIRP suggests nearly 100% odds of liftoff then, which we think is spot on.  We had always been skeptical about a 50 bp move and the Ukraine crisis has quashed expectations for a larger move,'' the analysts added. 

''Looking ahead, nearly 175 bp of tightening is priced in over the next 12 months, up from 150 bp seen at the end of last week, followed by another 25 bp in the following 12 months. Such a path would see the Fed Funds rate peaking near 2.0% vs. 1.75% at the end of last week. We continue to believe that the terminal rate will have to be much higher but at least the market is moving in that direction again.''