GBP/AUD Exchange Rate Climbs on Risk-Off Mood
(Updated 17:10, 07/03/2022) The Pound (GBP) has continued to firm against the Australian Dollar (AUD) this afternoon as brief risk-on tailwinds give way to more bearish trading sentiment. Despite an ongoing commodities rally, market mood is downbeat on account of the continually escalating conflict in Ukraine.
Further reports of civilian deaths weigh upon morale: in a bold move, both the US and United Kingdom have pledged to phase out Russian oil, with the US imposing an outright ban. President Joe Biden announced this afternoon that ‘[America] will not be part of subsidising Putin’s war.’
Meanwhile, oil company Shell has apologised for buying Russian oil last week, saying it will immediately stop buying Russian crude oil and not renew term contract.
According to Susannah Streeter, a senior investment and markets analyst at Hargreaves Lansdown:
‘Whatever happens, Shell is still set to remain an oil and gas giant for decades, but by taking this stance and exiting the Russian markets with a continued focus on renewables, it should help reduce the risk of the company ending up in the ethical waste bin.’
Original article continues below:
Pound Australian Dollar Exchange Rate Rebounds on GBP Strength
The Pound Australian Dollar (GBP/AUD) exchange rate is trending up this morning following yesterday’s downturn, as risk sentiment alters to favour Sterling and equities rebound.
At the time of writing, GBP/AUD is trading at A$1.8022, up 0.7% from today’s opening levels.
Pound (GBP) Supported by Stronger Risk Sentiment, BoE Hopes
The Pound is rising against several peers this morning in spite of weaker-than-expected data from the British Retail Consortium (BRC). The BRC’s retail sales monitor printed at 2.7% for the year to February, as opposed to the 5.5% forecast.
Nevertheless, Sterling has found support on today’s stronger risk sentiment, which is depicted by a goodish rebound in the equity markets. The establishment of humanitarian corridors for Ukrainians fleeing targeted cities may have helped to prompt some risk-on support.
Furthermore, UK Defence Secretary Ben Wallace claims that Putin’s forces are ‘getting more desperate’:
‘Russia has still not been making its advances, it’s day 13. That northern column that we have often talked about is still pretty much stuck, I mean really stuck, so that’s not advancing.’
On the other hand, Russian jets continued to drop bombs overnight near the Ukrainian capital of Kyiv and the third round of peace talks between Russia and Ukraine ended without much progress. Against such a backdrop, further GBP gains may be limited.
Australian Dollar (AUD) Comes Under Selling Pressure
The Australian Dollar (AUD) has come under pressure so far today, as the currency’s commodity-fuelled rally comes against resistance. The ‘Aussie’ came under selling pressure during the Asian trading hours.
AUD investors are attempting to gauge whether recent global developments will impact the Reserve Bank of Australia (RBA)’s patient stance on monetary tightening; however, this seems unlikely given the bank’s explicit focus upon wage growth dynamics.
More likely to provide AUD strength ahead is ongoing positive sensitivity to rising commodity prices, and an upbeat re-pricing of China’s growth outlook. The ‘Aussie’ benefits from strong Chinese data, given the two countries’ strong trading relationship.
This evening, traders will focus upon a speech by Governor Philip Lowe to ascertain likely AUD dynamics ahead. If Lowe strikes a hawkish tone, the Australian Dollar may benefit.
Pound Australian Dollar Exchange Rate Forecast: Consumer Confidence to Influence Trading?
Looking ahead, the Pound Australian Dollar exchange rate may be affected by Australia’s consumer confidence figures this evening. If consumer confidence falls as expected, ‘Aussie’ sentiment could take a hit.
Into tomorrow, Chinese inflation data could also impact the Australian Dollar. If inflation drops below the 0.9% forecast, the Chinese Yuan (CNY) may suffer, applying AUD downside.
Elsewhere, risk dynamics could also affect GBP/AUD. If market sentiment worsens, risk-off dynamics could lend AUD support, conversely suppressing GBP upside.