Pound Australian Dollar Exchange Rate Continues Climbing on Risk Aversion
(Updated 16:55, 15/03/2022) The Pound Australian Dollar (GBP/AUD) exchange rate has continued to trend up this afternoon as fresh risk flows draw support away from perceived-riskier currencies.
Russian President Vladimir Putin is reported to have accused Ukraine of ‘not being serious about finding a mutually acceptable solution’ to the conflict there, denting trading sentiment with his comments; in a brief statement with European Council President Charles Michel, the Kremlin said they also discussed the military operation and humanitarian-relief measures.
Meanwhile, Ukrainian President Volodymyr Zelensky addressed the Canadian Parliament to ask for more support. In a passionate speech to the Canadian MPs, he said:
‘Imagine at 4am, each of you, you start hearing bomb explosions, severe explosions, can you imagine hearing you, your children, hearing explosions?’
Zelensky also expressed his frustration that Ukraine’s allies had not heeded his appeal for the enforcement of a no-fly zone:
‘Can you imagine calling other friendly nations, and asking them ‘please close the sky, close the air space, stop the bombing… and in turn they express their deep concerns about the situation: ‘we talk to our partners and they say ‘please hold on a little longer’?’
The Ukrainian President described the situation as dire, but added that it’s allowed Ukraine to see who its true friends are.
Original article continues below:
GBP/AUD Exchange Rate Rises on UK Data, Risk Sentiment
The Pound Australian Dollar (GBP/AUD) exchange rate is trending up this morning as the Pound (GBP) is bolstered by upbeat employment data. Meanwhile, the Australian Dollar (AUD) continues to come under pressure from the Covid surge in China.
At the time of writing, GBP/AUD is trading at A$1.8100, up 0.2% from today’s opening levels.
Pound (GBP) Enjoys Employment-Based Tailwinds
The Pound is climbing against several peers this morning as UK employment data printed above expectations.
The unemployment rate fell to 3.9% in January as opposed to the 4% expected – the lowest level in two years. The unemployment rate had been falling overall since late 2013 up until the start of the coronavirus pandemic and has now returned to pre-pandemic levels.
Adding to Sterling tailwinds, the number of people claiming unemployment-related benefits fell by 48.1K in February, compared to -31.9K previously.
The news was not all upbeat, however, as the ONS chief economist Grant Fitzner remarked that the labour market still had slack:
‘The number of people out of work and not looking for a job rose again, meaning total employment remained well below its pre-pandemic level.’
However, the data is sufficiently positive that the Bank of England (BoE) is expected to go ahead with its plan to tighten policy further at its meeting on Thursday.
Also buoying GBP is a moderately risk-on market mood: regarding the conflict in Ukraine, Ukrainian President Volodymyr Zelenskyy’s adviser said the country are expecting to reach a peace agreement with Russia within a couple of weeks at the earliest or in May at the latest.
Australian Dollar (AUD) Sentiment Dented by Chinese Headwinds
The Australian Dollar struggles to gain support this morning as bearish trading in China weighs upon the currency. Given China’s strong trading relationship with Australia, Chinese headwinds tend to suppress AUD appetite.
Despite upbeat retail sales and industrial production data in China, the Shanghai Composite Index lost nearly 5% during Tuesday’s Asian session as the entire Jilin province and technology centre of Shenzen went into lockdown.
The spread of the virus has become such a concern that several multinational companies have halted operations in China, including Toyota, Volkswagen and Apple supplier, Foxconn.
‘Aussie’ losses are capped by promising headlines from Ukraine and some limited optimism from the Reserve Bank of Australia (RBA); the minutes from the latest RBA meeting noted that Australian economy remained resilient and spending was expected to pick up further after the omicron outbreak.
Nevertheless, there is caution in that quarter too. RBA policymakers considered that while inflation had picked up, it was too early to conclude that it was sustainably within the target band. According today’s minutes, the board is prepared to be patient as it monitors how the various factors affecting inflation in Australia evolve.
Pound Australian Dollar Exchange Rate Forecast: External Factors to Decide Movement Tomorrow?
Looking ahead, a lack of significant data through tomorrow’s session suggests that the Pound Australian Dollar exchange rate may trade on external factors.
If Ukraine remains optimistic that progress can be achieved via peace talks with Russia, GBP/AUD may sink on risk-on trading; however, if mounting civilian casualties weigh upon morale then the Pound may outperform the ‘Aussie’ due to its comparative risk-off appeal.
Later in the week, Australian unemployment data will likely affect ‘Aussie’ trading, while the Bank of England’s interest rate decision and accompanying commentary is expected to drive GBP movement.