Pound Australian Dollar (GBP/AUD) Exchange Rate Recovers as Commodities Rally Eases
(Updated 16:00, 7/3/22) The Pound Australian Dollar (GBP/AUD) exchange rate bounced off a one-year low today amid a pullback in commodities prices.
Soaring materials prices have been driving the commodity-linked Australian Dollar (AUD) higher in recent days as the Russia-Ukraine war fuels supply fears. However, it seems that some key commodities were overbought. The subsequent correction saw AUD slip.
Today’s rise in materials prices was also partly caused by rumours of a ban on Russian oil and gas. However, Germany and Japan have pushed back on such a boycott. This may have been another reason why some commodities couldn’t hold their gains.
As a result, the Pound was able to regain ground against the ‘Aussie’.
Sterling may have found some support as investors sought to buy the dip after GBP/AUD fell to a one-year low.
In addition, GBP traders may have been cheered by reports of trilateral negotiations. Turkish Foreign Minister Mevlüt Çavuşoğlu said he would mediate negotiations between Sergei Lavrov of Russia and Ukraine’s Dmytro Kuleba. Turkey is a close ally of both Russia and Ukraine.
While previous talks have failed to make much progress, markets are perhaps hoping that these negotiations will be different. With Turkey acting as a mediator, both sides may be to reach a ceasefire agreement.
At the time of writing, GBP/AUD is trading at around AU$1.79. This is up almost 1% from today’s one-year low of AU$1.7729 but still down from the week’s opening level.
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Pound Australian Dollar (GBP/AUD) Exchange Rate Falls amid Ukraine Crisis and Surging Commodities Prices
The Pound Australian Dollar (GBP/AUD) exchange rate has extended its downside today, hitting a one-year low, as Sterling’s selloff amid the Russia-Ukraine war continues.
Meanwhile, the Australian Dollar (AUD) has been able to capitalise on the Pound’s (GBP) weakness thanks to rising commodities prices and strong Australian data.
Australian Dollar (AUD) Continues to Surge as US Explores Ban on Russian Oil and Gas
The ‘Aussie’ Dollar strengthened in overnight trade, as rising commodities prices continue to see the commodity-linked currency surge higher.
The ongoing Russia-Ukraine war is putting upward pressure on the global commodities market. Australia’s top five exports – iron ore, coal, petroleum gas, gold and aluminium oxide – are all rising higher.
Both Russia and Ukraine are large producers and exporters of raw materials, particularly iron ore and aluminium. Fears of shortages due to Russia’s invasion have seen demand for these metals rise while production dwindles. Iron ore is currently trading at a six-month high.
News on Sunday that the US and its European allies are exploring a ban on Russian oil and natural gas is pushing energy-related commodities higher, too. This in turn is boosting petroleum gas and coal prices. Coal is at a new record high, having increased by almost 40% over the past month alone.
Gold, meanwhile, is just shy of the all-time high hit in August 2020. Investors are flocking to the safe-haven metal amid widespread risk aversion.
In addition, better-than-expected results from both the Ai Group’s services index and the ANZ job advertisements report may have added to AUD’s upside.
Pound (GBP) Extends Slide as Ukraine Crisis Continues
The Pound, meanwhile, remains offered today as the horrifying situation in Ukraine shows no signs of improving.
Although Russia and Ukraine agreed a ceasefire last week to allow the evacuation of civilians, Russian shelling continued over the weekend. Russia has put forward a new ceasefire offer, saying they will open up humanitarian routes for civilians fleeing Ukraine.
However, those routes lead only into Russia or Russia-controlled Belarus. Critics say that Russia is merely putting forward the idea, knowing it is not acceptable to the Ukrainian side, in an attempt to deflect blame for civilian casualties.
The news of a potential ban on Russian oil and gas may also be weighing on Sterling, as it would likely push energy costs even higher in the UK.
Russia’s invasion and the subsequent sanctions are likely to impact the global economy, but European economies, such as the UK’s, may be harder hit. Therefore, this negative news is pushing the Pound even lower today.
GBP/AUD Exchange Rate Forecast: Pressure on the Pound Likely to Persist
Looking ahead, GBP/AUD could fall further in the coming days. Russia’s invasion looks increasingly likely to become a protracted and bloody conflict, with particularly damaging effects on Europe’s economy. As a result, Sterling may remain weak while commodities continue to climb.
Tonight, a speech from Reserve Bank of Australia (RBA) Assistant Governor Michele Bullock could cause some movement. So far the RBA has been pushing back on rate hike bets. However, markets still expect lift-off fairly soon. If Bullock strikes a more hawkish tone then AUD could make further gains.