Pound Australian Dollar Exchange Rate Dented by Cautious Optimism
The Pound Australian Dollar (GBP/AUD) exchange rate is trading with modest losses this morning amidst an improvement in market risk appetite.
At the time of writing the GBP/AUD exchange rate is trading at around AU$1.9055, down roughly 0.2% from today’s opening rate.
Australian Dollar (AUD) Buoyed by Hopes for Diplomatic Solution to Ukraine Crisis
The Australian Dollar (AUD) is ticking higher at the start of this week, amidst hopes US President Joe Biden could hold a summit with Russian President Vladimir Putin in an attempt to defuse the situation in Ukraine.
Biden has agreed ‘in principle’ to the summit proposed by French President Emmanuel Macron, whilst the Kremlin has stated there are no ‘concrete plans’ but has not ruled out holding talks.
The news has bolstered market risk appetite this morning on hopes a diplomatic solution could be found, despite warnings from the US that Russia appears to be ‘continuing preparations for a full-scale assault on Ukraine very soon’.
Russia reportedly has roughly 150,000 troops amassed on Ukraine borders, while joint military drills with Belarus scheduled to end on Sunday have been extended.
Pound (GBP) Buoyed by Stronger-than-Expect UK PMIs
Meanwhile, the Pound (GBP) has been able to temper its losses against the Australian Dollar this morning, following the publication of the UK’s latest PMI releases.
According to data published by IHS Markit, growth in the UK’s services and manufacturing sector beat forecasts this month, with their respective indexes printing at 60.8 and 57.3.
Of the two the services PMI looks to have had the most positive impact on the Pound this morning as it printed at an eight-month high and has bolstered expectations the Bank of England (BoE) could deliver its third consecutive interest rate hike in March.
Chris Williamson, chief business economist at IHS Markit, commented:
‘With the PMI’s gauge of output growth accelerating markedly in February and cost pressures intensifying to the second-highest on record, the odds of an increasingly aggressive policy tightening have shortened, with a third back-to-back rate rise looking increasingly inevitable in March.’
The odds of a March rate hike from the BoE are currently hovering at around 90%.
Pound Australian Dollar Forecast: Hawkish BoE Speech to Bolster Sterling?
Looking ahead the Pound Australian Dollar (GBP/AUD) exchange rate may accelerate on Tuesday, following a speech from BoE policymaker Dave Ramsden.
As one of the policymakers to vote for the BoE to raise interest rates to 0.75% last month its likely Ramsden could strike a hawkish tone tomorrow, which could send the Pound higher.
In the meantime, AUD investors will look to a speech by Reserve Bank of Australia (RBA) Assistant Governor Christopher Kent for fresh impetus later tonight.
Should Kent reiterate the RBA’s unwillingness to raise interest rates before 2023, then the ‘Aussie’ could fall.