Pound Australian Dollar Trades Sideways Throughout the Session
(Updated 16:50, 28/04/2022) The Pound Australian Dollar (GBP/AUD) exchange rate trended sideways through today’s session, peaking twice before dipping on Sterling downside.
The Pound came under repeated pressure from risk-off headwinds, alongside bearish expectations for the Bank of England (BoE). Exerting additional downside are concerns that the British economy is being hit by weak consumer confidence, a cost of living crisis, rising input costs and supply chain disruption.
Furthermore, Brexit delays were added to the list of political impediments weighing on morale, as Brexit opportunities minister Jacob Rees-Mogg told reporters a ‘new regime of border import controls’ will be established by the end of 2023.
While the Cold Chain Federation – which represents firms in the UK’s temperature-controlled supply chain – welcomed the delay, saying the UK still wasn’t ready to handle the impact of Brexit at the border, various veterinary groups have been more critical.
Representatives argue that this latest suspension could threaten health, because sanitary and phytosanitary checks would continue to take place away from the border. James Russell, senior vice-president, of the British Veterinary Association, said:
‘We urge the government to abandon these plans and close off the threat of causing significant damage to our food and farming industries.’
Original article continues below:
GBP/AUD Exchange Rate Slumps as Ukraine Conflict Rumbles On
The Pound Australian Dollar (GBP/AUD) exchange rate is sliding back to yesterday’s lows this morning, having staged a brief pickup towards the close of the Asian session. The Pound (GBP) is suffering on account of low risk appetite, given a lack of meaningful data to extend support.
At the time of writing, GBP/AUD is trading at A$1.7554, down 0.3% from today’s opening levels.
Pound (GBP) Succumbs to Risk-Off Headwinds
The Pound is relinquishing minor gains made before European trading began, as threats from Russia dampen global risk appetite. Without economic data or external factors to buoy GBP sentiment, Sterling succumbs to geopolitical headwinds.
Despite widespread condemnation from the international community, Russia has taken to retracting energy supplies as a means to punish Europe for it’s support of Ukraine. Ukraine’s President Volodymyr Zelenskyy accused Russia of ‘energy blackmail’ against Europe in his most recent national address:
‘This week, Russia’s leadership launched a new series of energy blackmail of Europeans. The decision to cut off gas supplies to Poland and Bulgaria is another argument in favour of the fact that no one in Europe can hope to maintain any normal economic cooperation with Russia.’
Furthermore, other European nations are considering acquiescing to Russia’s demand to pay for energy in Roubles (RUB), despite remarks from European Commission President Ursula von der Leyen that this would be a breach of sanctions imposed against Russia.
The Financial Times reports that gas distributors in Germany, Austria, Hungary and Slovakia are planning to open rouble accounts at Gazprombank in Switzerland in order to satisfy Russian requirements for payment in its own currency.
Australian Dollar (AUD) Resists Downside on Extended CPI Gains
The Australian Dollar (AUD) continues to benefit today from bullish rate hike expectations for the Reserve Bank of Australia (RBA), following yesterday’s CPI release.
The Australian Bureau of Statistics reported on Wednesday that consumer prices in Australia surged at the fastest annual pace in two decades during the first quarter of 2022, as transport prices rose the most since the 1990 Iraqi invasion of Kuwait; additional upward pressures came from the cost of food amongst other factors.
A brief risk-on impulse also lent support to the ‘Aussie’ earlier this morning, alongside upbeat data from China. A proxy for the Chinese economy, AUD may have benefitted from the news that China’s current account surplus widened to $89.5bn in the first quarter of 2022 from $78.6bn in the same period last year.
An increased surplus indicates healthy levels of product exports, a relief for China’s economy amidst recent lockdowns. There is a risk that trading may subsequently have taken a dent, however, as factories were forced to close in Shanghai due to a Covid outbreak.
Australian officials had expressed some concern that Chinese demand for iron ore would fall due to reduced production in the country, but the chief executive of Fortescue Metals Group has reassured markets that all the signals suggest steel mills [in China] are still operating and buying Australian raw materials.
GBP/AUD Exchange Rate Forecast: Bailey Speech to Inspire Movement?
Looking ahead, Bank of England (BoE) speeches may influence the Pound Australian Dollar exchange later. Recent forecasts suggest the BoE could take a cautious approach going forwards, but if speakers David Bailey and Sarah Breeden undermine these expectations with a hawkish tone, Sterling could firm.
Elsewhere, developments in Ukraine are likely to affect risk sentiment, which could influence GBP/AUD. If Germany, Austria, Hungary and Slovenia go ahead with Rouble payments, risk appetite may worsen on the prospect of a Russian victory.