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27 Apr 2016
AUD/USD: Drop in iron ore adds to CPI-led pain
AUD/USD is currently consolidating ahead of the 0.7650, having fallen more than 100 pips after shocking Australian CPI readings, way below forecasts.
Odds of a rate cut by the RBA increasing by the minute
At present, chances for a rate cut by the RBA in May stand at 49% probability vs 16% before the CPI, with strong volumes through Aus 3 yr futures, which has led to a collapse in Australian yields.
Iron ore decline weighs on AUD too
Adding to bearish case for the Aussie, one of the market traders keep an eye to assess the currency's intrinsic value, the Dalian iron ore futures, are also down by 3.6%.
In a recent note to clients, Charles St-Arnaud, FX Strategist at Nomura, said that "despite the increase in iron ore prices, the oversupply is likely to remain in the medium term, suggesting that iron prices should decline, once the temporary increase in Chinese demand subsides."
Odds of a rate cut by the RBA increasing by the minute
At present, chances for a rate cut by the RBA in May stand at 49% probability vs 16% before the CPI, with strong volumes through Aus 3 yr futures, which has led to a collapse in Australian yields.
Iron ore decline weighs on AUD too
Adding to bearish case for the Aussie, one of the market traders keep an eye to assess the currency's intrinsic value, the Dalian iron ore futures, are also down by 3.6%.
In a recent note to clients, Charles St-Arnaud, FX Strategist at Nomura, said that "despite the increase in iron ore prices, the oversupply is likely to remain in the medium term, suggesting that iron prices should decline, once the temporary increase in Chinese demand subsides."