Pound Australian Dollar Exchange Rate Remains Low on Weak GBP Sentiment
(Updated 16:45, 22/02/2022) The Pound Australian Dollar (GBP/AUD) exchange rate failed to recoup its losses through this afternoon’s session, despite levelling out around midday. Volatile trading sentiment caused several currency pairs to waver as world leaders assessed the impact of Russia’s military intervention in Ukraine.
While US officials took a hardline approach from the offset, describing Russian troops’ ‘peacekeeping’ role as ‘nonsense’, EU representative Josep Borrell suggested the military move could not be considered a ‘fully fledged invasion’.
The UK has taken a similar angle to the US, insisting that the ‘invasion’ has already begun; EU members states in the Baltics share this opinion, arguing that Putin will only taunt the bloc with incremental incursions if he’s not met with resistance. Such EU governments say that it will be death to Ukraine by a thousand cuts if the bloc prevaricates.
Meanwhile, Russia’s upper house of parliament voted unanimously this afternoon in favour of giving Putin authority to deploy Russia’s armed forces abroad. Subsequently, Jens Stoltenberg – Nato secretary general – considers that Russia shows ‘every indication of continuing to plan for a full-scale attack of Ukraine’.
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GBP/AUD Exchange Rate Nosedives on Market Volatility
The Pound Australian Dollar (GBP/AUD) exchange rate has shot down this morning as news from Ukraine has a mixed effect on trading. The risk-on Australian Dollar (AUD) manages to retain earlier gains despite subdued trading sentiment.
At the time of writing, GBP/AUD is trading at A$1.8834, down 0.5% from today’s opening levels.
Pound (GBP) Crashes against Several Peers
The Pound (GBP) is sliding steeply against several peers this morning on news that Russia has sent troops into the contested Ukrainian territories of Donetsk and Luhansk.
According to UK health secretary Sajid Javid:
‘We have seen that [Putin] has recognised these breakaway eastern regions in Ukraine and from the reports we can already tell that he has sent in tanks and troops. From that you can conclude that the invasion of Ukraine has begun.’
A lack of UK data leaves Sterling to trade upon geopolitical tensions: investors worldwide are concerned of the impact that conflict could have on central bank policies.
While traders acknowledge the possibility of both the European Central Bank (ECB) and Federal Reserve scaling back their policy tightening measures, however, GBP investors are confident that the Bank of England (BoE) will continue to hike interest frequently and aggressively.
Representatives at ING bank consider that ‘markets are likely estimating a greater fallout from a collapse in diplomatic relationships with Russia for the Eurozone than for the UK.’
Nevertheless, the Pound is trading subdued as UK government officials prepare to impose sanctions upon oligarchs close to Putin who own property in the UK, send their children to British schools and have funded the Conservative party.
Australian Dollar (AUD) Resists Downside on Quieter Currency Markets
The Australian Dollar is holding its position against rival currencies, having made various gains during the Asian trading session. Despite an overall risk-off mood and strength amongst safe-haven assets, the risk-on currency has so far resisted significant downside.
According to Reuters, currency markets have responded in a quieter manner to the Ukrainian conflict than equity markets. Matt Simpson, senior market analyst at City Index, says:
‘Currency markets are not really showing the same level of caution as equity markets… When you read the headlines you’d expect to see some follow-through in the markets. We are in equities but we’re not in currencies.’
A greater trading stimulus for the ‘Aussie’ appears to be rising bets for an eventual rate hike from the Reserve Bank of Australia (RBA).
CommSec chief economist Craig James is expecting the first rise from the central bank in more than a decade to occur in June; other banking economists are tipping an increase in August.
Pound Australian Dollar Exchange Rate Forecast: Central Bank Dynamics to Influence Trading?
Looking ahead, the Pound Australian Dollar exchange rate may be affected later in today’s session by a speech from the Bank of England’s Dave Ramsden.
The RBA’s Assistant Governor Christopher Kent has already spoken this morning, informing markets that the Australian central bank is ‘shaking up’ the way it provides liquidity to the banking system as it ceasing quantitative easing and prepares for an eventual rate hike.
If Ramsden strikes a similar tone, the Pound may be able to recoup some of its losses; a general hawk, Ramsden was one of four dissenters at the bank’s February MPC meeting who called for a 50bps rate hike.