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Aussie Dollar (AUD) Sinks as Oil and Iron Ore Values Soften

05 May 2017 by News Desk

The Australian dollar has been trending lower in recent sessions and the pound has reached an eight-month high against it this week as oil prices continue to fall, say currency experts FC Exchange.

Oil Values Tumble Leaving Commodity Currencies Weaker

Both the Norwegian Krone (NOK) and Australian Dollar were in a tight competition to take the crown in the contest for the worst performing currency this week. Oil prices faltered with both West Texas Intermediate and Brent sinking to their lowest values since November 2016.

In addition, the Australian dollar had to deal with weakening iron ore and coal prices. The value of iron ore particularly affects the Aussie dollar as it’s Australia’s largest commodity.

AUD Exchange Rate and the Reserve Bank of Australia (RBA)

The Reserve Bank of Australia left its economic forecasts the same in its monetary policy statement on Friday. It’s expected by many that the central bank will be monitoring the situation in both Australia’s labour and housing markets with the potential to adjust monetary policy if necessary. Today’s RBA developments did very little to the Australian dollar which was too preoccupied with commodity price losses.

US Dollar (USD) and Non-Farm Payrolls

Investors in the US dollar were hoping to see a rebound in employment in Friday’s Stateside trading with the release of the highly influential non-farm payrolls figure. The April number reached 211K, following March’s disappointing negatively revised 79K – formerly thought to be 98K. Surprisingly, the US unemployment rate number decreased to 4.4%, defying economists’ forecasts to rise. Economists had suggested that the US unemployment number would increase in April, from 4.5% to 4.6%.

Pound Sterling (GBP) Exchange Rate Caught up in Politics

Tittle tattle has been rife this week with Theresa May accusing Brussels of trying to interfere with the UK general election.

Theresa May made a speech on Wednesday which spoke negatively about Brussels’ bureaucrats, saying: ‘Britain’s negotiating position in Europe has been misrepresented in the continental press, the European Commission’s negotiating stance has hardened. Threats against Britain have been issued by European politicians and officials. All of these acts have been deliberately timed to affect the result of the general election that will take place on 8 June.’
The European Commission responded, saying: ‘This election in the United Kingdom is mainly about Brexit. But we here in Brussels, we are very busy, rather busy, with our policy work. We have too much to do on our plate. So, in a nutshell, we are very busy. And we will not Brexitise our work. To put it in the words of an EU diplomat, the 30-minute slot that we are going to devote to Brexit per week, for this week it’s up.’

It appears as if political developments will continue to influence the pound and with negotiations taking place over the space of two years, GBP could find itself precarious as reports of political comments come to light.
Disclaimer: This economic update is provided by FC Exchange a Global Reach Group Company, industry leaders in foreign exchange. Authorised affiliates are permitted to reuse content.

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