AUD Correlated To Iron Ore Prices

Published 12/22/2017, 09:00 AM
Updated 03/09/2019, 08:30 AM
AUD/USD
-
DX
-
TIOc1
-

The Australian dollar has remained above the US70c mark in today’s trading session, which caps off a pretty successful week against its US counterpart, seemingly unfazed by the prospect of Donald Trump’s tax reforms and expectations of higher rates in the US

In the biggest tax changes in a generation, Trump, along with his republican party has introduced sweeping changes to the US tax system to make it one of the most competitive in the world which includes slashing the corporate tax rate to 20 percent as well as substantial personal income tax cuts

The legislation in theory should lead to the repatriation of billions of dollars back to the US by companies who had previously sheltered their money off shore to avoid paying higher taxes.

The changes are expected to create a huge demand for US dollar’s and provide support for the currency

The world’s largest economy is also expected to hike interest rates next year which will put the yield well above Countries such as the UK, Canada and Australia, which should generate further interest in the greenback

So after all this why is the Australian dollar refusing to budge, and instead powering ahead against the US dollar when it has all of these headwinds to face?

We have to remember that the main driver of the aussie dollar for more the best part of 15 years has been commodity prices and in particular iron ore, which is Australia’s biggest export.

It has rallied over 25% percent during the last 6 weeks to around $70 at the time of writing this article and with demand from China set to increase as we enter the New Year, further gains are expected.

So traders of the Australian dollar could do them self a favor by not paying to much attention to outside factor when trading the Aussie dollar but to keep an eye on commodity prices.

Latest comments

Loading next article…
Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2025 - Fusion Media Limited. All Rights Reserved.