Iron Ore Price Slumps ? Analysts Forecast Gains for GBP AUD Exchange Rate

November 27, 2014 - Written by John Cameron

STORY LINK Iron Ore Price Slumps ? Analysts Forecast Gains for GBP AUD Exchange Rate

Pound to Australian Dollar Exchange Rate Forecast

Today’s session has coincided with the Thanksgiving holiday in the US, making for lower than usual trading volumes in the currency markets. However, this did not stop several of the major global tenders experiencing price action and analysts forecast that this could be set to continue into tomorrow’s session.

RBA Jawbones Aus Dollar Weaker

Perhaps somewhat surprisingly, the Australian Dollar (currency:AUD) has outperformed all of the other sixteen most-actively traded global currencies so far today. The Aussie endured a pronounced slump during yesterday’s session following comments from another domestic policymaker talking his local unit down. The Australian tender severely lost its way yesterday following comments from Reserve Bank of Australia Governor Philip Lowe which suggested that a weaker Aussie was desirable in order to assists his nation in becoming less dependent on its mining sector. The Pound Sterling Australian Dollar exchange rate spiked to above the 1.8500 GBP AUD threshold following the suggestion that a weaker Australian unit would be a good thing.

Interest Rate Cuts in 2015 For Australia?

More significantly, Lowe went on to float the possibility of a tightening of monetary policy next year, stating that, ‘we are seeing lower interest rates lead to higher asset prices and that's inducing more real activity in the economy.’ He added that, ‘the problem that other countries have had is that mechanism is not working, or at least not working very effectively. My judgement would be that if further interest rate reductions were required, they would have some effect in stimulating economic activity.’

Iron Ore Tumbles

However, today’s near-term renaissance for the Australian Dollar, which has seen the GBP AUD exchange rate drop to as low as 1.8342, could prove to be short-lived. The price of iron ore – a vital export from Australia’s mines, has plunged by the best part of 10% again today. The key constituent of steel dropping to fresh near-term lows is forecast to weigh on Australia’s export incomes moving forward. Leading analysts have upped their forecast for the chances of a cut in Australian interest rates to 45% for next year in response to the news.

Aussie-Watchers Await China Data

Looking ahead, the next risk event of note for the Australian Dollar comes in the form of tonight’s Leading Index survey from China. Australia’s mining industries are desperately in need of a strong showing from the closely-watched data set. Anything other than this, and the GBP AUD exchange rate could track Northwards towards yesterday’s highs of 1.8500+.

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TAGS: Australian Dollar Forecasts Currency Predictions Pound Aus Forecasts