Pound Australian Dollar (GBP/AUD) Exchange Rate Falls Further as Moscow Mechanism Invoked
(Updated 16:55, 03/03/2022) The Pound Australian Dollar (GBP/AUD) exchange rate extended its downturn this afternoon as news from Ukraine weighed upon Sterling, while the ‘Aussie’ retained upside support.
Overall risk sentiment is mixed, as reflected in European and US equity markets – but strong Australian commodity prices continue to lend support to the Australian Dollar along with hopes for diplomatic progress via ‘peace talks’ between Russia and Ukraine.
In the meantime, the Australian Government has asked Facebook, Twitter, Google and other digital platforms to block content generated by Russian state media to curb ‘disinformation in relation to the Russian invasion of Ukraine’.
Meanwhile, UK sources report that 45 OSCE (Organisation for Security and Co-operation in Europe) participating nations are invoking the Moscow Mechanism, which will allow experts to investigate rights abuses committed by Russian forces.
The OSCE will help to establish whether war crimes have been committed, presenting any findings to international courts and tribunals and invoking accountability mechanisms.
Original article continues below:
GBP/AUD Exchange Rate Tumbles on ‘Relief Rally’
The Pound Australian Dollar (GBP/AUD) exchange rate found some support this morning as reports of Russian negotiators looking to discuss a ceasefire with Ukraine triggered some risk-on trading. Nevertheless, intense fighting continues in various major cities, capping gains for perceived riskier assets.
At the time of writing, GBP/AUD is trading at A$1.8324, down 0.2% from today’s opening levels.
Pound (GBP) Subdued despite Hopes of Ceasefire
The Pound (GBP) is trending down against its peers today in spite of a second round of ‘peace talks’ being scheduled for today between Russia and Ukraine.
While the news lent brief support to risk-on currencies, upside is limited by a general sense of disillusionment; Ukraine has said that Moscow’s demands are unacceptable and Russia must stop bombing Ukrainian cities if any progress is to be made in negotiations.
Meanwhile, the United Nations reports that one million refugees have now fled Ukraine as missile strikes become commonplace and the major Ukrainian city of Kherson becomes the first to fall into Russian control.
One resident sheltering at home in Kherson told reporters:
‘I just look out of the window and see the Russian soldiers and Russian tanks, and I read all the local news, I just don’t go outside because it’s really dangerous now.’
Meanwhile in the UK, investors digest the latest PMI results – service sector activity in the UK rose to 60.5 in February according to finalised data: above last month but below forecasts. Given the downward revision from flash estimates, this could suppress GBP sentiment further.
Australian Dollar (AUD) Supported by Positive Trade Balance
The Australian Dollar (AUD) has risen this morning as Australia’s January trade balance revealed an increase in the country’s surplus, from A$8.824bn (upwardly revised) in December to A$12.981bn – above forecasts of A$9.05bn.
Today’s data heralds the largest trade surplus since last July, as exports rose while imports fell amid further global demand. Exports grew 8% to an all-time high of A$49.25bn, while imports dropped 2% month-on-month to a new record high of A$36.36bn.
Brief risk-on headwinds also supported the ‘Aussie’, alongside continuously climbing commodity prices: Australia’s main exports – metals, coal and grains – are all trending up, with gold attracting particular support on account of its safe-haven appeal.
On the other hand, AUD gains may be capped by a dovish Reserve Bank of Australia (RBA). According to analysts at Westpac:
‘The RBA did not do the ‘Aussie’ any favours with its wary statement accompanying maintenance of the cash rate at 0.1%.’
RBA Governor Philip Lowe’s statement, released on Tuesday, stressed that the war in Ukraine is a major new source of uncertainty, adding that the Board is committed to maintaining highly supportive monetary conditions to achieve its objectives of a return to full employment in Australia and inflation consistent with the target.
Pound Australian Dollar Exchange Rate Forecast: ‘Aussie’ to Trade on Retail Sales?
Looking ahead, the Pound Australian Dollar exchange rate may trade tomorrow on Australian retail sales. Sales fell by 4.4% in December, only to rise by 1.8% in January according to flash estimates: if Friday’s data confirms an increase in sales, AUD could enjoy tailwinds.
Elsewhere, a lack of significant UK data leaves the Pound to trade on external factors. If today’s peace talks go well, Sterling may enjoy some risk-on upside – although this looks unlikely as Russian missile strikes intensify across Ukraine.