Market Update – 28th May 2019 – AUD Drifts Lower, But Iron Ore Seen Supporting AUD Amid Lower Interest Rates

Please note that the commentary below is factual information provided to a group of readers as a web blog, and where an opinion is expressed by the author, it is GENERAL ADVICE only.

AUD Drifts:

Another quiet evening of trade in which U.K and U.S equity markets remained closed for the Spring Bank Holiday and Memorial Day respectively. As a result and with little to guide the Aussie Dollar we drifted off by about 10-20 points across the board. AUD/USD continues to flirt with 0.69, while AUD/EUR appears glued to the mid 0.61’s. The RBA’s next meeting occurs the following Tuesday and bets are rising that we’ll see an interest rate cut from 1.5% to 1.25%. This WILL have an impact on the AUD and likely a negative one, because a lower benchmark interest rate means the AUD yields less. Which means it’s less attractive to international investors.

Iron Ore To The Rescue:

Iron Ore markets are the real surprise this year, with the benchmark price moving as much as 50% this year to its highest point since April 2014. The massive move in the price of 62% Fe is a direct result of sustained supply concerns as a result of Vale’s tailings dam issues – Vale is the worlds largest iron ore miner just in front of BHP and RIO.  Sustained production concerns could see Iron Ore prices remain elevated through the rest of the year and this could offset some of the AUD losses as a result of lower interest rates.

No economic data is released today. However markets reopen in the U.S and U.K tonight.

AUD EXCHANGE RATES:

AUD/USD – 0.6887

AUD/GBP – 0.5424

AUD/EUR – 0.6148

AUD/NZD – 1.0537

AUD/JPY – 75.459

OTHER MARKETS:

All Ords (XAO) – 6,544

Gold – A$1,858/oz

Silver –  A$21.09/oz

WTI – US$59.11/barrel

DATA RELEASES TODAY:

No economic data

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Patrick Downes

Senior Corporate FX Dealer

Phone Patrick – 0431 278 632 

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