Australian Dollar Seeks to Regain its Losses on back of Positive Pound Sterling and Stagnant US Dollar
Iron Ore futures took a hit yesterday, with prices tumbling to its lowest level in almost two months as increasing ore stockpiles at Chinese ports suggest a potential cooling in demand for steel and other ore deposits. This had an immediate negative effect on the Australian Dollar (AUD), which dropped heavily against a basket of major currencies in the Asian trading session, falling to lows of 0.6031 and 0.6990 against the Pound Sterling (GBP) and Euro (EUR), respectively.
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Nonetheless, the bearish outlook was reversed overnight as the resilient AUD began recouping the losses it has accumulated since mid-last week. Whether this upward trend will continue ahead for the AUD remains to be seen as there are no real market-moving data announcements for the remainder of the month.
In the United Kingdom, Investors remained bullish on the GBP on Tuesday night as Theresa May plans to enact Article 50 starting today. While many analysts assumed that triggering of Article 50 would cause a bearish sell-off of the GBP, the short term effect has been far different, with the GBP increasing to its highest level since December against the USD (1.2560) and its highest level since January against the AUD (1.6569). Although the GBP has lost some ground against the AUD overnight, the economy appears to be ready to absorb the effects of the UK’s transition out of the European Union.
In ‘Greenback’ news, despite a recent rate hike by the United States (US) Federal Reserve, the US Dollar (USD) has failed to make forecasted gains on the back the Trump administration’s inability to have its revised Healthcare reforms passed and Obamacare discontinued. This has Investors nervous about taking positions on the USD as the possibility of a potential “Trump Rally” is becoming increasingly unlikely if the President’s administration continues to have key policies blocked by Congress.
A currently bearish stance saw a stagnant USD overnight, despite some positive data coming out of the US. USD Advance Goods Trade Balance for February came in ahead of its initial forecast of -$66.4b, reducing the deficit to -$64.8b. This reduction is positive news for the US economy and has assisted in boosting Consumer Confidence figures for the month of March, returning an index score of 125.6, which is more than 11 points higher than the forecasted 114.0. While US data appears strong, the lack of clarity in policy making adds an element of political risk to the USD, which is potentially limiting its true current value.