Pressure expected on Australian dollar

Financial and commodity markets analytics

The Australian dollar is sitting in a tight range today in early trading today as the market gears up for a round of big key data throughout the week.

At 3.49pm (AEDT) the currency was trading at around US71.88c, virtually unchanged from Fridays close of US72.89c; and still reeling from last week’s capex figures which have now put an interest rate cut back on the table from the Reserve Bank of Australia.

In their last, few meetings the RBA has painted a slightly rosy picture of the Australian economy, and after 2 rate cuts already this year have been reclined to act further even though many economists say this is needed to boost the Australian economy.

Since RBA governor Glenn Stevens speech last week, the game has trained dramatically changed with business expenditure falling to its worst figure on record and Iron ore , Australia; biggest export, dropping to a new 6 year low of around US$43 a tonne.

Since the end of the commodity boom, the Australian dollar has fallen in tandem with Iron ore and is down over 35% since its high in 2011.

Many analysts are now worried about the level of the currency because even though Iron ore has continued to slide, the Aussie dollar has remained resilient, diverging from the usual pattern with the declining iron ore price and leaving many questions unanswered.

Rates are expected to remain o hold at 2 percent when the RBA meets on Tuesday but the following monetary statement will be closely watched where governor Stevens may be forced to stop defending the Australian dollar and acknowledge that another rate cut is needed.


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