Pound Australian Dollar Exchange Rate Falls Anew on ICJ Order
(Updated 16:50, 16/03/2022) The Pound Australian Dollar (GBP/AUD) exchange rate trended up briefly this afternoon, before sinking once more as risk-on tailwinds continue to support the Australian Dollar (AUD).
Risk sentiment has been bolstered in particular by the UN International Court of Justice (ICJ)’s condemnation of Russia’s invasion in Ukraine. The ICJ ordered Russia to withdraw, saying it had not seen any evidence to support claims the attack was justified.
While the ruling is unlikely to influence Putin’s choices, it does provide an authoritative refutation of his pretext for starting the war and may cause others to question his leadership.
One of the latest international figures to speak out against the Kremlin is ballerina Olga Smirnova, who claimed she was against the war with all the fibres of her soul:
‘I never thought I would be ashamed of Russia, I have always been proud of talented Russian people, of our cultural and athletic achievements. But now I feel that a line has been drawn that separates the before and the after.’
Original article continues below:
GBP/AUD Exchange Rate Tumbles on Improving Risk Appetite
The Pound Australian Dollar (GBP/AUD) exchange rate has fallen so far this morning, as progress is made in negotiations between Ukraine and Russia: subsequently, risk-on tailwinds are buoying the Australian Dollar (AUD).
At the time of writing, GBP/AUD is trading at A$1.8061, down 0.4% from today’s opening levels.
Australian Dollar (AUD) Bolstered by Ukraine Developments
The Australian Dollar (AUD) is climbing against the majority of its peers this morning as positive news from Ukraine uplifts risk sentiment.
Investors remain hopeful for a diplomatic solution to the Russia-Ukraine crisis, despite comments from Vladimir Putin yesterday that Kyiv was not serious about finding a mutually acceptable solution to the conflict.
Subsequently, Mykhailo Podoliyak, one of the Ukrainian representatives, said that there was room for a compromise between the two sides, while Ukrainian President Volodymyr Zelenskiy noted in a video statement that negotiations were already sounding more realistic.
‘Efforts are still needed, patience is needed,’ Zelenskiy added; ‘Any war ends with an agreement.’
Another aide to Zelenskiy, Ihor Zhovkva, confirmed that negotiations had become ‘more constructive’ and that Russia was no longer demanding that Ukraine surrender. Talks are set to resume via video link today.
Capping AUD upside somewhat are comments from Australia’s Prime Minister Scott Morrison, who said at the Chamber of Commerce and Industry early today that Australia will likely be affected by the negative global economic fallout from Russia’s invasion of Ukraine.
‘The world is facing the biggest energy shock since the 1970s,’ said Morrison, ‘That is likely to depress global growth and we know higher oil prices mean greater pressure on family budgets at the petrol bowser.’
Pound (GBP) Benefits from BoE Optimism, Risk-On Trading
The Pound (GBP) is trading in a mixed range against its peers this morning, as risk-on sentiment and optimism over the Bank of England’s rate decision lend support while a lack of data caps gains.
The Bank of England is widely expected to hike interest rates tomorrow for the third time in a row as inflationary pressures in the UK mount; the Consumer Price Index (CPI) reached a near 30-year high of 5.5% in January and is likely to rise further.
Forty-four of forty-nine economists polled by Reuters believe the Monetary Policy Committee will add another 25 basis points to Bank Rate this week, taking it to 0.75% – its pre-pandemic level. Five said there would be no change, however, as Russia’s invasion of Ukraine has infused uncertainty into a climate where high inflation has complicated the Bank’s outlook.
Paul Dales at Capital Economics acknowledges:
‘The economic consequences of the war in Ukraine have worsened the already tricky mix between soaring inflation and slowing GDP growth.’
Four of the nine MPC members voted for a 50 bps hike last month but none of the economists surveyed had that as their base case for this month’s decision: one analyst at Goldman Sachs commented that ‘following recent commentary from MPC members, we think a 50 basis point hike is very unlikely.’
Pound Australian Dollar Exchange Rate Forecast: Currencies to Trade on Geopolitical Developments?
Looking ahead, a lack of data through the remainder of the day leaves both the Pound and the Australian Dollar to trade on external factors.
If Ukrainian representatives remain hopeful regarding negotiations with Russia, risk-on tailwinds could support the ‘Aussie’ further – if the conflict escalates, however, GBP/AUD could gain on a risk-off market mood.