High Risks of Iron Ore Price Crash Leave AUD/NZD Exchange Rate Down
The Australian Dollar to New Zealand Dollar exchange rate (AUD/NZD) has fallen by -0.6% today, with the AUD posting additional losses against the Euro and the Pound.
This deterioration follows forecasts that iron ore prices could be on the brink of plummeting, as made by Reuters Asia Commodities Columnist Clyde Russell.
Mr Russell has warned that;
‘Spot iron ore prices in Asia appear to be poised on the precipice of a steep decline as a myriad of factors suggest an imminent correction’.
Russell has stated that along with rising supplies of iron ore in Australia and Brazil, there is also the risk of falling steel prices weighing on the value of iron ore.
Highlighting the main reason for this pricing resilience, Russell has said;
‘The strongest reason iron ore prices are holding up well is that China’s imports have remained robust.
China imported 1.07-billion tonnes of the steel-making ingredient in 2017, up 5% on the prior year, according to customs figures’.
Because there is the overhanging threat of a sharp drop in the value of this Australian mining commodity, the AUD/NZD exchange rate has remained unfavourable.
Falling Consumer Confidence Adds Pressure on AUD/NZD Exchange Rate
Another factor reducing Australian Dollar demand has been the latest ANZ-Roy Morgan weekly consumer confidence index, which has shown a drop in optimism.
The reading fell from 123.5 points to 119.4, which was a -3.3% decline.
ANZ Head of Australian Economics David Plank said that this was still a good overall reading, stating;
‘Consumer confidence pulled back this week after a series of strong reports.
Talk of electricity blackouts and a proposed rail strike in Sydney may have weighed on overall sentiment. It is also possible that the New Year return to work was a factor for some.
Despite the weekly fall, this sub-index sits well above its long term average, as does the headline index’.
New Zealand Dollar to Australian Dollar Rate Rises on TPP Agreement
The New Zealand Dollar has appreciated against the Australian Dollar, the Pound and the Canadian Dollar today, due to significant international trade news.
New Zealand, along with 10 other nations, has agreed to a new version of the Trans-Pacific Partnership (TPP).
This deal had an uncertain future a year ago, when in one of his first actions President Donald Trump withdrew the US from the arrangement.
Since then, negotiators from all member nations have been working to salvage the deal; the latest announcement means that a final sign-up could come in March.
The deal is expected to cut tariffs for all members, meaning easier trade and a potential boom in economic growth all round.
Australian Dollar to New Zealand Dollar Recovery Possible on Upcoming Confidence Reading
The next Australian economic data to watch out for will come on 30th January, when the NAB business confidence score for December will be announced.
The bank is tipped to report a small rise in business sentiment during the month, which could cause an Australian Dollar to New Zealand Dollar advance.
The next significant news from New Zealand comes out on 25th January, consisting of inflation rate stats for the fourth quarter of 2017.
A minor quarter-on-quarter slowdown has been predicted, which could lead to the New Zealand Dollar declining in value.