Australian Dollar (AUD) Exchange Rate Forecast: Iron Ore Prices Tumble, Australian Unemployment Data Ahead | Thinking Australia
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Australian Dollar (AUD) Exchange Rate Forecast: Iron Ore Prices Tumble, Australian Unemployment Data Ahead

10 April 2017 by FC Exchange

There are a number of mounting factors that could impact exchange rates in the near future, including geo-political tensions, interest rate hikes, economic slowdowns, and commodity price fluctuations, say industry experts FC Exchange.

General Currency Market Overview

At the moment, markets have a few concerns and a few focal points. In Europe, concerns over Brexit and a UK economic slowdown are prevalent, while politics as a whole causes some general uncertainty. With French elections fast approaching, there’s plenty of speculation surfacing over who could win and whether the new leadership could offer French citizens a referendum to say goodbye to the EU and the euro. Furthermore, with geo-political tensions increasing by the day, investors are much more likely to head for safe-haven currencies like the Japanese yen or Swiss franc at the first sign of trouble.

Another important focal point at the minute is interest rates. Healthy economic data from the US is likely to encourage the Federal Reserve to hike interest rates again this year and markets are currently expecting another two increases before reaching 2018. If the Fed does push rates higher, it could be very positive for US dollar strength. However, President Donald Trump’s recent stumbling blocks have caused a fall in USD sentiment and a lack of faith that some of his proposed campaign strategies will actually come to light.

Meanwhile in Australia, concerns over the housing market are prominent. The Reserve Bank of Australia (RBA) has commented on this sector of the economy noting a ‘build-up of risks’ surrounding it. The RBA is also concerned about the faltering labour market which is currently, ‘pretty soft’.

Industry expert Paul Brennan commented: ‘We expect some statistical payback after the two ticks jump in the unemployment rate last month from 5.7% to 5.9%. Our forecast is for a 20,000 rise in employment in March and for the unemployment rate to retrace slightly to 5.8%. The March labour market report will likely be another reminder that economic growth is below trend and that the pace of wage rises is unlikely to pick up in the near future.’

Commodities to Impact AUD and NZD

In recent weeks experts have believed that some commodity prices would increase – something that would have boded well for both the Australian and New Zealand dollars. However, spooked by a monumental number of stockpiles in China, the price of Australia’s most lucrative commodity, iron ore, has tumbled.

On the flip side, New Zealand is expecting to see more stable dairy prices this year following a recent rally. Increased demand for dairy products from China should help to keep prices balanced.

Economic Data to Impact Australian Dollar (AUD) Exchange Rates

On Monday Australian home loans data disappointed markets when it contracted by -0.5% in February, rather than falling flat at 0.0% as forecast following January’s 0.4% growth. In addition, Australian investment lending also printed negatively, coming in at -5.9% in February after the previous month’s 4.6% growth.

Tuesday will be another interesting day for the Aussie dollar with the release of the National Australia Bank (NAB) business confidence and weekly consumer confidence figures. Wednesday will continue with more moderately influential data in the form of the Westpac consumer confidence numbers.

However, investors in the AUD will be firmly focused on Thursday’s high-tier data with both Australian unemployment rate and employment change numbers scheduled for release.

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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