Pound Australian Dollar (GBP/AUD) Exchange Rate Climbs on Peace-Talk Progress
(Updated 14:30, 29/3/22) The Pound Australian Dollar (GBP/AUD) exchange rate rallied earlier today as renewed Russia-Ukraine peace talks offer a glimmer of hope.
Today’s round of negotiations showed promise, with both sides suggesting that they’ve made progress towards a peace deal.
Following the talks, Russia’s defence ministry said it would ‘fundamentally cut back military activity in the direction of Kyiv and Chernihiv’ in order to ‘increase mutual trust for future negotiations to agree and sign a peace deal with Ukraine.’
The positive tone in negotiations comes after Russian Defence Minister Sergei Shoigu said Moscow’s ‘main goal’ in Ukraine was now the ‘liberation of Donbas’. This suggests that Russia is scaling back its invasion ambitions – another sign that may mean peace is edging closer.
European markets are celebrating the breakthrough in peace talks, with both the Euro (EUR) and the Pound (GBP) jumping higher.
GBP/AUD leapt by two cents from AU$1.74 to AU$1.76 before meeting resistance and dropping back to AU$1.755.
Original article continues below:
Pound Australian Dollar (GBP/AUD) Exchange Rate Slips following Aussie Retail Sales
The Pound Australian Dollar (GBP/AUD) exchange rate is trading close to a one-year low today as dovish Bank of England (BoE) expectations and an optimistic tone around the Russia-Ukraine war keep Sterling in a narrow range.
Meanwhile, the Australian Dollar (AUD) enjoyed upbeat retail sales data overnight. This is helping it to hold strong against the Pound (GBP) this morning.
Australian Dollar (AUD) Gains on Strong Sales Data
The Australian Dollar strengthened against the Pound overnight thanks to better-than-expected Australian retail sales data.
Domestic sales increased by 1.8% in February, beating forecasts of a 1% rise and accelerating from the previous month’s 1.6% growth. The strong results came as lower Covid cases and easing restrictions boosted consumer spending.
A mixed mood in Asian markets seemed to limit the ‘Aussie’ Dollar’s gains, however. Markets in Hong Kong and Japan closed higher, while the Shanghai Composite fell. Ongoing Covid lockdowns in China are keeping a lid on risk appetite. As the risk-sensitive ‘Aussie’ shares a close correlation with the Chinese economy, this capped AUD’s gains.
Pound (GBP) Stuck Near One-Year Lows
GBP/AUD bounced as the European session opened, with GBP investors perhaps buying the dip after the Pound ‘Aussie’ pair hit a one-year low.
The rebound seems to lack follow-through, however, with GBP/AUD wavering in a narrow range.
On the one hand, Sterling is finding support thanks to an upbeat mood in European markets. Russia-Ukraine peace talks resumed today in Turkey, raising investors’ spirits.
The renewed negotiations come as Russia seems to be scaling back the ambition of its invasion.
Russian Defence Minister Sergei Shoigu said on Tuesday:
‘The main tasks of the first stage of the operation have been completed. The combat potential of the Ukrainian Armed Forces has been significantly reduced, which makes it possible to focus our main attention and main efforts on achieving the main goal – the liberation of Donbas.’
Some analysts believe that Russia is trying to save face after failing to achieve its key objectives due to fierce Ukrainian resistance. This could hopefully represent the first steps of an end to conflict in Ukraine.
However, Sterling remains under pressure due to dovish expectations from the Bank of England (BoE) and the UK’s cost-of-living crisis.
Yesterday, BoE Governor Andrew Bailey warned about the bleak economic outlook, saying: ‘we are at an even more challenging point for the global economy than after the global financial crisis’. His comments highlighted both the struggles the UK economy faces and the bank’s increasingly cautious approach to monetary policy.
Analysts at HSBC believe that the BoE’s recent dovish tilt will weigh on the Pound over the coming weeks. Representatives at the bank said:
‘We believe the shadow cast by the BoE meeting over the GBP will persist in the coming weeks, especially if BoE members continue their dovish refrain’.
As a result, Sterling is currently stuck wavering near one-year lows.
GBP/AUD Exchange Rate Forecast: Risk Appetite in Focus
Looking ahead, GBP/AUD could continue to waver today if Sterling’s headwinds and tailwinds cancel each other out. However, if there are positive developments in the Russia-Ukraine peace talks, Sterling may be able to claw back some losses.
Data is fairly sparse for both currencies over the coming days, so risk appetite could be the defining factor in GBP/AUD movement. If China’s zero-Covid strategy continues to cause concern then the ‘Aussie’ might relinquish some gains.