GBP/AUD Exchange Rate Wavers as Geopolitical Tensions Persist
(Updated 17:00, 16/02/2022) The Pound Australian Dollar (GBP/AUD) exchange rate traded in a mixed range through today’s session as tensions between Russia and Ukraine eased initially before rekindling over Russian military action.
Risk-on currencies faced headwinds as NATO declared there had been ‘no sign of de-escalation on the ground’, despite assurances from Moscow that troops were withdrawing from Crimea: instead, Canada’s defense minister Anita Anand observed that ‘the escalation of Russian troops at the Ukrainian border is increasing and significant.’
Albeit a safer investment than the Australian Dollar, the Pound was unable to make significant gains against the ‘Aussie’, as investors remained bearish on inflationary pressures.
Original article continues below:
Pound Australian Dollar Exchange Rate Slides on Easing Geopolitical Tensions
The Pound Australian Dollar (GBP/AUD) exchange rate is sinking this morning as an upbeat market mood buoys the risk-sensitive Australian Dollar. Higher-than-expected UK data lends some Pound (GBP) upside, but fails to raise GBP/AUD from a six-day low.
At the time of writing, GBP/AUD is trading at A$1.8920, slightly below today’s opening levels.
Australian Dollar (AUD) Ignores Weak Chinese Data, Buoyed by Risk Appetite
The Australian Dollar (AUD) is climbing against its peers today as market sentiment remains high following yesterday’s apparent de-escalation of tensions between Russia and Ukraine. Moscow rolled back some of its troops from the Ukrainian border as Russian President Vladimir Putin remarked that Russia does not want to go to war with Europe.
These comments were undermined slightly by Putin’s subsequent statement that Russia was not satisfied Ukraine wouldn’t become a NATO member in the near future. Early this morning, US President Joe Biden said that a Russian attack on Ukraine was still very much a possibility – yet markets remain optimistic as world leaders continue to prioritise diplomacy.
Speaking in the European parliament, the European Commission president Ursula von der Leyen told MEPs it was her ambition that Russia and Europe would cooperate on shared interests, embracing ‘a future where free countries work together in peace.’
Given upbeat trading sentiment, the Australian Dollar was unhurt by China’s disappointing inflation data this morning. China’s headline Consumer Price Index (CPI) missed 1% year-on-year forecasts, while the country’s Producer Price Index (PPI) also declined to 9.1% compared to a 9.5% market forecast.
Pound (GBP) Tumbles as Inflation Hits 30-Year High
The Pound is sinking against several peers today despite UK inflation exceeding expectations, beating last month’s annualised reading by 0.1%. Consumer prices rose by 5.5% in the 12 months to January 2022 – the highest reading since 1992.
While a rising CPI puts pressure upon the Bank of England (BoE) to tighten monetary policy, it also reveals the extent of Britain’s cost-of-living crisis – an issue which has dominated headlines in recent days. Yesterday, data showed that wages failed to keep up with inflation last year, putting increasing numbers of UK households under pressure.
Business groups have also warned that rising prices will push more firms towards insolvency: the CBI lobby group said the government needs to cut taxes on investment to boost productivity and allow businesses to award sustainable annual wage rises.
Echoing this sentiment, Suren Thiru, the chief economist at the British Chambers of Commerce, remarked:
‘More needs to be done to limit the unprecedented rise in costs facing businesses, including financial support for those struggling with soaring energy bills and delaying April’s national insurance rise.’
GBP/AUD Exchange Rate Forecast: Russia-Ukraine Tensions to Drive Movement?
Looking ahead, a lack of further data for either the UK or Australia today means the currency pair is likely to trade on risk sentiment.
If tensions re-escalate between Russia and Ukraine, the ‘Aussie’ may sink against its safe-haven peers – meanwhile, Pound trading could be affected by ongoing worries over Britain’s cost-of-living crisis.