Pound Australian Dollar Exchange Rate Continues to Rise on Market Optimism
(Updated 17:00, 30/03/2022) The Pound Australian Dollar (GBP/AUD) exchange rate continued to climb this afternoon in spite of misgivings over Russia’s intentions in Ukraine.
Russia had agreed to withdraw troops from around Kyiv – including Chernihov – but early reports suggested that the Russian military were continuing to fire missiles.
Meanwhile, Ukrainian Presidential advisor Oleksiy Arestovych indicated that Russia was moving forces from northern to eastern Ukraine to try and encircle Ukrainian troops.
In the meantime, Vladimir Putin has agreed to further talks with German Chancellor Olaf Scholz regarding Rouble (RUB) payments for Russian gas. Germany moved closer to gas rationing on Wednesday, after activating an emergency plan designed to help it cope with disruption in supplies from Russia.
The diplomatic move from Putin may have fuelled risk-on trading, raising hopes of Russian diplomacy in another arena.
Original article continues below:
GBP/AUD Exchange Rate Climbs as Commodity Prices Weaken
The Pound Australian Dollar (GBP/AUD) exchange rate is firming this morning, as risk-on trading sentiment supports the Pound (GBP) while the Australian Dollar (AUD) remains subdued on lowering commodity prices.
At the time of writing, GBP/AUD is trading at A$1.7465, up 0.3% from today’s opening levels.
Australian Dollar (AUD) Accrues Losses as Exports Lose Value
The Australian Dollar (AUD) is weakening against its peers today, as declining commodity prices weigh upon the currency.
Despite risk-on flows as investors remain optimistic over improving relations between Ukraine and Russia, the ‘Aussie’ is unable to sustain upward momentum: according to the Thompson Reuters CRB Index, core commodities are down on a daily basis.
In recent weeks, the rising cost of coal and iron ore have supported AUD in the face of volatile market sentiment, but coal prices have now ticked down slightly and are expected to extend the decline, according to the Australian Treasury:
‘Key commodity prices are assumed to decline from current elevated levels by the end of the September quarter 2022…
The metallurgical coal spot price is assumed to decline from US$512/tonne to US$130/tonne, while thermal coal’s spot price will drop from US$320/tonne to US$60/tonne.’
This forecast may be extending downside, while a lack of significant Australian data further caps gains. February’s retail sales were shown to have increased overall yesterday, lending some support – although the good news was tempered by falling sales in flood-struck Western Australia.
Pound (GBP) Extends Gains on Risk-On Trading
The Pound is rising against several currencies so far today, as an overall risk-on mood lends tailwinds.
A lack of domestic data caps significant gains, but Sterling is benefiting from external factors as traders maintain hopes that Ukraine and Russia may soon come to a ceasefire agreement.
Optimism is balanced by word from the Pentagon that Russia is moving troops around Kyiv instead of withdrawing them; on a similar note, the British military intelligence argue that Russian forces are returning to Belarus to reorganize and resupply.
Nevertheless, Ukrainian President Volodymyr Zelenskyy said that recent talks have been ‘positive’, while China has joined international calls for the protection of civilian lives in Ukraine and respect for international humanitarian law.
Although Dai Bing, China’s ambassador to the UN, said that increasing sanctions on Russia will ‘give rise to new humanitarian problems’, he conceded that the situation on the ground was ‘worrying’.
Meanwhile, Sterling gains continue to be limited by a dovish Bank of England (BoE). The UK’s central bank recently softened its language on the need for further rate hikes, arguing that Britain’s economic situation is ‘very volatile’.
Pound Australian Dollar Exchange Rate Forecast: UK GDP to Direct Movement?
Looking ahead, finalised UK GDP data may influence the Pound Australian Dollar exchange rate tomorrow- the UK economy is expected to have expanded by 1% in the last quarter of 2021.
While such expansion would not exceed Q3 growth, such an outcome may lend upside simply on a lack of contraction.
Later in the day, Australian manufacturing data could affect rates – if activity increased in March as expected, the ‘Aussie’ is likely to enjoy some support.