Pound Australian Dollar (GBP/AUD) Exchange Rate Slips as Iron Ore Prices Lift

April 1, 2022 - Written by John Cameron

STORY LINK Pound Australian Dollar (GBP/AUD) Exchange Rate Slips as Iron Ore Prices Lift

Pound Australian Dollar (GBP/AUD) Exchange Rate Tumbles amid Commodities Rally

The pound Australian dollar (GBP/AUD) exchange rate is falling today. Poor manufacturing PMI figures are pulling the pound (GBP) down today. On the other hand, the Australian dollar (AUD) is being bolstered by an ongoing rally to commodity prices amid expectations that Russia could limit energy exports to Europe. The Ukraine-Russia conflict is also prompting a retreat in risk appetite today which is potentially weighing on the currency pair.

At time of writing the GBP/AUD exchange rate is at around $1.7474, which is down roughly -0.4% from this morning’s opening figures.

Australian Dollar (AUD) Gains as Iron Ore Prices Climb

The Australian dollar (AUD) is climbing against its rivals today. A rally in the price of iron ore is likely helping to bolster the ‘Aussie’ despite disappointing Chinese manufacturing data. Additionally, expectations that Australia may become an alternative energy source for Europe may be helping to push the currency higher.

The price of iron ore has continued to rise in recent days, supporting the Australian dollar’s gains. Markets are expecting robust demand for the commodity once Covid-19 restrictions are lifted in China. Case numbers in the country are still high, with the city of Shanghai reporting nearly 4,500 new daily cases on Friday. The city had been due to emerge from a strict four-day lockdown today but was extended on Thursday evening.

The ‘Aussie’ may also have been boosted by a rise to manufacturing output in March. PMI figures rose to 57.7 above forecasts of 57.3 despite further Covid restrictions and disruptions due to flooding in the country. Analysts pointed out that the sector may suffer in the coming months however with the Ukraine-Russia conflict set to further intensify price pressures.

Ai Group chief Innes Willox said:

‘There was an encouraging rise in new orders in March although with labour and input supply constraints growing, manufacturers will be stretched to fill orders in a timely way.’

Finally, expectations that Russia could limit energy supplies to Europe may be helping AUD to make further gains. Speaking on Thursday, Russia’s President Vladimir Putin made clear that he expected European nations to make payments for gas supplies in rubles. Commodity prices have climbed higher following the announcement.

Pound (GBP) Drops as Manufacturing Output Hits Slowest Pace in 13 Months

The pound (GBP) is sliding against its competitors today. Sterling is likely being pulled down by a risk-off trading environment as well as below-forecast manufacturing output figures.

UK manufacturing expanded at its slowest pace in 13 months with signs of worsening price pressures. PMI figures printed below forecasts of 55.5 to 55.2 with new orders sinking to their lowest level since January 2021. The weakness in orders came amid the Ukraine-Russia conflict, Brexit tensions, and ongoing supply chain issues.

A retreat to risk appetite is also likely keeping sterling supressed today. Despite a fresh round of peace talks, renewed hostilities in the Ukraine-Russia conflict are likely prompting risk-off trading. Attempts to evacuate the city of Mariupol have continued to fail amid broken ceasefire agreements, Reports that Ukrainian forces are continuing their push toward the city of Chernihiv may also limit bets on GBP.

GBP/AUD Exchange Rate Forecast: Will RBA Leave Rates Unchanged?

Looking ahead to the coming week for the pound, a forecast uptick to the UK’s services output on Tuesday could bolster sterling.

For the Australian dollar, investors will be keenly awaiting the Reserve Bank of Australia’s (RBA) interest rate decision. The central bank is expected to leave rates unchanged, but any deviation could see AUD soar. A hawkish forward outlook in the RBA’s chart pack on Wednesday could also boost the ‘Aussie’.

On Thursday, a forecast narrowing of Australia’s trade surplus could limit gains for the currency. Friday’s financial stability review from the RBA could also prompt movement in the ‘Aussie’ depending on the central bank’s position.

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