(Updated 16:50 18/03/22)
The Pound Australian Dollar (GBP/AUD) exchange has ticked downward today. Risk appetite continued to retreat in the face of renewed Russian assaults. Fighting has reached the centre of Mauripol, whilst Russian insiders clai that Putin is set to continue the war regardless of peace efforts.
Speaking to Reuters anonymously, officials said:
‘I’ve seen nothing which suggests that the original intent of Putin has significantly altered.’
At time of writing the GBP/AUD exchange rate is at around $1.7799, down roughly -0.2% from this morning’s opening figures.
Pound Australian Dollar (GBP/AUD) Exchange Rate Trades Narrowly after BoE Interest Rate Decision
The Pound Australian Dollar (GBP/AUD) exchange rate is rangebound today. A mixed outlook regarding the war in Ukraine is weighing on both currencies. A dovish forward outlook from the Bank of England (BoE) on Thursday is keeping pressure on Sterling. The Australian Dollar (AUD) meanwhile is seeing mild gains off high iron ore prices.
At time of writing the GBP/AUD exchange rate is at around $1.7819, virtually unchanged from this morning’s figures.
Pound (GBP) Slips as BoE Signals Dovish Outlook
The Pound is struggling to make headway against many of its rivals today. Gains for the Pound are being limited by a dovish tact from the Bank of England (BoE) after Thursday’s interest rate decision. Additionally, retreating hopes for progress in Russia-Ukraine peace talks is weighing on Sterling today.
Thursday’s interest rate decision from the BoE disappointed investors as the central bank hiked interest rates by 0.25%. Markets had priced in a small chance of a 0.5% rate hike and Sterling fell sharply following the announcement. A dovish future outlook from the BoE also dented confidence in Sterling amid the war in Ukraine.
In its meeting minutes, the BoE said:
‘The effects of Russia’s invasion of Ukraine would likely accentuate both the peak in inflation and the adverse impact on activity by intensifying the squeeze on household incomes.’
Dwindling hopes for productive peace talks in the conflict are also likely weighing on GBP today. Reports indicated fresh Russian missile strikes on an airfield in Lviv on Friday morning. Fresh doubts over Vladimir Putin’s sincerity regarding the peace talks have also likely caused a retreat to risk appetite today.
Australian Dollar (AUD) Climbs as Iron Ore Recovers Losses
The Australian Dollar (AUD) is climbing against the majority of its rivals today. The risk-on currency is being supported by a further rally in commodity prices.
Iron ore prices have continued to recover recent losses this week which is likely supporting AUD. The price of the commodity currently stands at $141.50. Reports of soaring Covid-19 case numbers in China weighed on the commodity earlier in the week.
Gains for AUD may be limited today ahead of a key conversation between US President Joe Biden and Chinese President XI Jinping. Biden is expected to press XI on reports that China has provided Russia with military support for its invasion of Ukraine.
Increased bets on a rate hike from the Reserve Bank of Australia (RBA) may also be supporting the Australian Dollar today. The unemployment rate for February remained largely unchanged on Thursday supporting analysts’ views of a further tightening to the country’s labour market.
GBP/AUD Exchange Rate Forecast: Will Private Sectors Struggle in February as Forecast?
Looking to next week for the Pound, inflation figures for February are forecast to hit fresh highs on Wednesday. This could push Sterling higher should investors see it as a sign for further rate hikes from the BoE.
GBP could be dented on Thursday however should March flash PMIs print as forecast. The UK is expected to see a fall across all private sectors.
For the Australian Dollar, a speech from RBA Governor Philip Lowe on Tuesday could prompt upward movement in the ‘Aussie’ should he give any hints of hawkish future policy.
An expected fall across all Australian private sectors on Wednesday could pull AUD down however. Markit flash PMIs for March are forecast to fall should figures print as forecast.