Pound Australian Dollar Exchange Rate Plunges Further as Ukraine Tensions Dent GBP
(Updated 16:55, 10/03/2022) The Pound Australian Dollar (GBP/AUD) exchange rate continued to trade sharply downwards this afternoon as risk-off trading sentiment prevailed.
The failure of Russia-Ukraine negotiations to produce a ceasefire agreement weighed upon market mood throughout the day, as Ukraine’s foreign minister, Dmytro Kuleba, tweeted that his counterpart Sergei Lavrov ‘seemed to have come to talk, not to decide’.
‘They seek Ukraine’s surrender,’ Kuleba wrote. ‘This is not going to happen.’
The Australian Dollar (AUD) was able to avoid risk-off downside, however, buoyed as it was by rising commodity prices.
While coal sank in price, iron ore – another of Australia’s main exports – rose 8.3% in cost compared with last week.
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GBP/AUD Exchange Rate Sinks as Diplomatic Talks Begin
The Pound Australian Dollar (GBP/AUD) exchange rate is falling this morning as a stronger risk appetite lends support to the risk-on Australian Dollar (AUD). Meanwhile, a lack of UK data exposes the Pound (GBP) to losses.
At the time of writing, GBP/AUD is trading at A$1.7943, down 0.4% from today’s opening levels.
Australian Dollar (AUD) Strengthens on Stronger Market Mood
The Australian Dollar is climbing against its peers today as risk sentiment improves in the currency markets; a meeting has commenced in Turkey between Russian and Ukrainian foreign ministers, Sergei Lavrov and Dmytro Kuleba.
There is optimism amongst the international community that the negotiations could go some way to resolving the Ukraine conflict, as Ukrainian and Turkish diplomats bid to end Russian aggression.
Today represents the first time Russia has sent a minister for discussions on the crisis – but Dmytro Kuleba says his expectations are limited:
‘I am not pinning any great hopes on them, but we will try and get the most out of [the talks]… Owing to the actions of the Ukrainian armed forces, as well as the coordinated actions with partners regarding sanctions, I am going to these negotiations in a strong position.’
Capping further AUD gains is some caution from the Reserve Bank of Australia (RBA) around hiking interest rates.
According to analysts at Westpac, the RBA’s view of Australian economic resilience should be reinforced by labour force data – but the central bank’s caution on rates will be starkly contrasted with the FOMC next week.
As the Federal Reserve admits that they underestimated inflationary pressures, RBA Governor Philip Lowe reiterates that the RBA has scope to remain patient, highlighting the dangers of raising rates too early.
Pound (GBP) Wavers amidst Lack of Data
The Pound is trading in a mixed range against its peers this morning, given a lack of significant UK data. Stronger risk sentiment provides some GBP upside, although gains are limited by the ongoing conflict in Ukraine.
Russian missiles continue to fall upon residential areas, killing civilians including children. In a virtual address, Ukrainian President Volodymyr Zelenskiy condemned yesterday’s attack on a maternity hospital, which wounded 17 people – pregnant women amongst them.
While staggering numbers of fleeing Ukrainian citizens have reached Poland and its neighbouring countries in safety, there is also concern over persistent breakdowns of ‘humanitarian corridors’. Agreed ceasefires have been continually breached by Russian forces, killing families attempting to evacuate.
Nevertheless, fresh attempts by the UK Home Office to expand the visa programme for Ukrainian refugees have lent some risk-on support following widespread criticism of the UK’s slow-paced visa-processing system.
According to armed forces minister James Heappey:
‘[The Home Office is] looking at a number of policy checks that they currently have in place in order to make the process easier.’
Pound Australian Dollar Exchange Rate Forecast: Ukraine Developments to Drive Movement?
Looking ahead, the situation in Ukraine will likely continue to be the main trading stimulus for GBP/AUD today. If talks progress positively between the Russian and Ukrainian foreign ministers, risk-on support could subdue Sterling further against the ‘Aussie’.
On the other hand, if RBA Governor Philip Lowe strikes a dovish tone during this evening’s address, AUD could lose support, buoying the Pound Australian Dollar exchange rate.