The Australian dollar is under further pressure today as Iron ore prices continue to fall and bets are mounting that the RBA will cut the cash rate next week.
At 9.27am (GMT) the Aussie dollar was trading at US75.87c slightly down from US75.97c in yesterdays close.
Iron ore fell below US$50 dollars a tonne for the first time in 10 years overnight, with the continuing slump costing the government a further $3bn in tax revenues, according to a Deloitte Access Economics director, Chris Richardson. The mid-year budget update assumed a price per tonne of US$60.
“What we’re now seeing is that commodity prices around the world are going back to normal,” noted Richardson
“That is a big problem for Australia. It’s an old mistake to assume that a boom is permanent. In this particular case it was a very large boom and both sides of politics spent a lot.” He added.
“A further cut in interest rates is also more likely as a result.”
All eyes will now be on US job numbers due for release on Friday including the unemployment rate and the non-farm payrolls figure.
“The Jobless rate and the non-farm payrolls have been the standout performer for the US currency in recent times helping the dollar reach record highs” noted analysts from Fibogroup forex brokers.
“The payrolls number came in at 20% above consensus last month and if we have a repeat performance the Australian dollar will most certainly find a new six year low below US75.58c”
“Adding more fuel to the fire is a potential rate cut next week from the RBA”
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