简体中文
繁體中文
English
Pусский
日本語
ภาษาไทย
Tiếng Việt
Bahasa Indonesia
Español
हिन्दी
Filippiiniläinen
Français
Deutsch
Português
Türkçe
한국어
العربية
Abstract:The Australian Dollar will struggle with low interest rates for a long time to come, but rising iron ore prices will counter at least some of their effects.
Australian Dollar, Iron Ore Prices Talking Points
The Australian Dollar lacks monetary policy support and will for some time
However, its home nations key commodity export is in brisk demand
This probably wont save the currency, but it may very well act as parachute and slow its decline
Join our analysts for live, interactive coverage of all major economic data at the DailyFX Webinars. Wed love to have you along.
The Australian Dollar remains stuck in an entrenched downtrend on its daily chart, but at least one prop seems to be strengthening markedly: iron ore prices.
Tech may rule the headlines but, when it comes to the global real economy, we still live in the iron age and Australia is the world‘s number one exporter of the industrial staple. Moreover, prices have risen sharply this year, by more than 50%. Supply has tightened, a process exacerbated by a fatal dam collapse at Brazil’s Córrego do Feijãomine near the village of Brumadinho in January and indeed by cyclones in Australia.
Already over $99/tonne, some analysts think the commoditys price could hit $120 this year according to a Reuters report. It seems that incipient trade war has done very little so far to dent demand for ore, with key Chinese dockside inventories falling sharply.
The days when higher ore prices could shore up the Australian Dollar on their own are long gone, as a look at the AUD/USD chart over the past year will prove.
Lack of Interest Rate Support is in the AUD/USD Price
The true gravity of this market is no longer commodity prices but rather interest rate comparisons and here the Australian Dollar is clearly still feeling the strain. Lat year‘s falls came as US interest rates rose. That process may very well be over but there’s no respite for the Aussie. The Reserve Bank of Australia cut its Official Cash Rate to a new record low of 1.25% last month. Its expected to cut again very soon and, perhaps to continue into next year. Deep cuts may be less certain than the markets believe, but another one, at least does seem likely.
However, a lot of this bearish news is already priced in by now to a market well used to a complete lack of monetary policy support. A sharp rise in iron ore prices probably cannot turn around the Australian Dollars fortunes on its own, especially while broad domestic inflation remains weak. But they do still bear close watching.
If iron ore does become durably more costly from here, AUD/USDs pace of decline could be seriously slowed. If 2019 is a better year for Aussie bulls than its predecessor, iron ore prices are likely to be one key reason why.
Disclaimer:
The views in this article only represent the author's personal views, and do not constitute investment advice on this platform. This platform does not guarantee the accuracy, completeness and timeliness of the information in the article, and will not be liable for any loss caused by the use of or reliance on the information in the article.
The start of November has been a dwindling moment for the general major currency market. As essential economic updates flood the surface of the entire foreign exchange market, in which most of the currency pairs especially the major pairs were greatly affected by the impact of the economic releases. However, the US dollar was discovered to have held the main currency exchange performance metrics as the central economic updates from the US region tend to have determined the significant changes that have occurred in the major currency market so far.
The dollar hovered below recent highs on Tuesday as traders waited for the Reserve Bank of Australia to lead a handful of central bank meetings set to define the rates outlook this week.
US DOLLAR, JAPAN ELECTION, USD/JPY, CHINA PMI, AUD/USD - TALKING POINTS
The Australian Dollar is up more than 2.6% on the back of a five-day rally with price eyeing initial resistance. These are the levels that matter on the AUD/USD charts.