(Updated 16:50 04/03/22)
The Pound Australian Dollar (GBP/AUD) exchange rate continued to fall today. The currency pair hit its lowest point since May 2021 as the Russia-Ukraine conflict continued to weigh on the Pound (GBP). The Australian Dollar (AUD) meanwhile soared as iron ore prices continued to rally.
At time of writing the GBP/AUD exchange rate is at around $1.7962, which is down roughly -1.3% from this morning’s opening figures.
Pound Australian Dollar (GBP/AUD) Exchange Rate Falls amid Commodities Rally
The Pound Australian Dollar (GBP/AUD) is plummeting down today. An ongoing rally in commodity prices off the back of the Russia-Ukraine conflict has helped boost the Australian Dollar (AUD). The Pound (GBP) meanwhile has suffered amid a retreat in global risk appetite.
At time of writing the GBP/AUD exchange rate is at around $1.8055, which is down roughly -0.8% from this morning’s opening figures.
Australian Dollar (AUD) Soars as Iron Ore Prices Beat Forecasts
The Australian Dollar (AUD) is soaring against its rivals today. The ‘Aussie’ has benefitted from surging iron ore prices amid the Russian invasion of Ukraine.
The price of iron ore is currently averaging $135.54 for financial year 2021-22, well above forecasts of $104.9. The commodity has continued to rise today and is currently sitting at a March-high of $151.11. Both Russia and Ukraine mine iron ore and traders fear that the conflict will impact exports of the commodity.
A high demand for iron in China has also helped boost the commodity and AUD along with it. Chinese steel production has now ramped up following the Beijing Winter Olympics.
Demand for AUD may have been also lifted off the back of expectations of an interest rate hike from the Reserve Bank of Australia (RBA). Whilst the RBA kept rates unchanged at its last meeting, markets now anticipate a rapid schedule of rate hikes.
Pound (GBP) Drops after Russian Nuclear Plant Attack
The Pound (GBP) is continuing to fall against its rivals today as the market mood continues to risk-averse. A Russian attack on the Zaporizhzhia saw a rapid retreat in risk appetite on Friday. Reports that radiation levels at the plant had remained within ‘normal limits’ help stabilised trading however.
As the conflict enters its ninth day, the attack on Europe’s largest nuclear plant prompted Ukrainian president Volodymyr Zelenskiy to accuse Russia of ‘nuclear terrorism’.
Speaking in televised address, Zelenskiy said:
‘No country other than Russia has ever fired on nuclear power units. This is the first time in our history, in the history of mankind, the terrorist state now resorted to nuclear terror.’
The Pound is likely to remain under pressure in the coming days owing to the conflict. Nato secretary general Jens Stoltenberg warned that attacks by Russian forces are likely to get worse. Stoltenberg stated that Russia is likely to deploy heavier weapons against Russian population centres in the coming days.
Sterling is likely to be kept under further pressure from a dovish change of tact by the Bank of England (BoE). Central banks around the globe have struggled to assess the potential impact of the Ukraine-Russia conflict on already-high inflation. Members of the central bank’s Monetary Policy Committee (MPC) have sought to pare back investor expectations of aggressive interest rate hikes recently.
GBP/AUD Exchange Rate Forecast: Will Further Sanctions Push Commodity Prices Higher?
With no significant data releases left for either currency this week, the Pound is likely to be dictated by global risk appetite surrounding the Russian invasion of Ukraine.
Sterling could see a boost should the Northern Ireland Protocol and Brexit-related headwinds continue to sit on the backburner amid the conflict.
For the Australian Dollar, the ongoing surge in iron prices is likely to continue to push the ‘Aussie’ higher. Any further sanctions that might affect ore exports from Russia will likely boost AUD further.