Pound Australian Dollar Sinks Further as Putin Recommends Diplomacy
(Updated 16:40, 15/02/2022) The Pound Australian Dollar (GBP/AUD) exchange rate has fallen further this afternoon as tentative signs of de-escalation at the Ukrainian border are supported by comments from Vladimir Putin.
The Russian President has confirmed that he ‘does not want war in Europe’, giving this as a reason for having set forth security proposals. Putin maintains that a ‘genocide’ is taking place in Eastern Ukraine’s Donbass region, but says the problem ought to be solved in accordance with the Minsk peace process.
Risk sentiment, though unsteady, has stabilised overall in response to these developments- although a crisis has not been unequivocally averted.
UK prime minister Boris Johnson has described UK intelligence as ‘not encouraging‘, remarking that the construction of Russian field hospitals near Ukraine, can ‘only can be construed as preparation for an invasion’.
Original article continues below:
GBP/AUD Exchange Rate Tumbles on Easing Geopolitical Tensions
The Pound Australian Dollar (GBP/AUD) exchange rate has slumped to a 4-day low this morning as the withdrawal of Russian troops to their military bases restores risk appetite. Elsewhere, UK jobs data impressed to the upside, with average earnings exceeding forecasts.
At the time of writing, GBP/AUD is trading at A$1.8956, down slightly on today’s opening levels.
Pound (GBP) Trades Mixed on Jobs Data, External Factors
The Pound (GBP) is trading in a mixed range against its peers this morning, as upbeat employment data supplies upside but gains are capped by changing risk sentiment.
UK jobs data revealed an unchanged unemployment rate for the month of December, as forecast; average earnings increased, however, by 4.3% year-on-year – as opposed to the 3.8% anticipated.
While the news is better than expected, analysts are quick to point out that the rise in wages lags behind the extent of inflation, as the cost of living in the UK puts pressure on UK households.
The Bank of England (BoE) warned earlier this month that UK inflation is expected to climb above 7% by April before easing off, leaving households facing the worst squeeze on their disposable incomes for at least 30 years.
According to the TUC’s General Secretary Frances O’Grady:
‘Pay packets are plummeting in value as bills and prices sky-rocket. This huge pressure on household budgets will only get worse unless the government takes proper action… After the longest wage squeeze in more than 200 years, Britain urgently needs a pay rise.’
Meanwhile, the withdrawal of Russian troops at the Ukrainian border has buoyed risk sentiment, supporting risk-on currencies while subduing their safe-haven peers. Against its perceived-riskier rivals, GBP is falling.
Australian Dollar (AUD) Recovers on Strengthening Risk Sentiment
The Australian Dollar (AUD) dipped during today’s Asian session, as minutes from the Reserve Bank of Australia (RBA)’s latest policy meeting struck a slightly dovish tone.
As reported by Reuters, ‘the Board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve’; the RBA remains unconvinced that inflation will continue climbing and wants to see wages respond before moving on interest rates.
Subsequently, however, the ‘Aussie’ received a boost from growing risk appetite: news that Russian troops were returning to their military bases quietened fears that an invasion of Ukraine was imminent.
Citing Russia’s military, Interfax commented that ‘a number of drills have finished… some units of western and southern military districts have started returning to bases.’
The move aligned with comments made yesterday by Russian foreign minister Sergey Lavrov, who suggested that there was still a path for diplomacy.
GBP/AUD Exchange Rate Forecast: Russian Military Action to Affect Movement
Looking ahead, the most immediate influence on the Pound Australian Dollar exchange rate is likely to be the Ukraine crisis. Any updates pertaining to the Russian military could have a significant impact on risk sentiment, thereby affecting the risk-on ‘Aussie’.
Another, less pressing issue that could still affect GBP/AUD is the situation in Northern Ireland. If tensions remain high between the British government and Ireland’s Democratic Unionist Party (DUP), GBP exchange rates may be subdued.