Forexscamreview Blog Business Australian Dollar Falls on Thursday as Commodity Prices Sink

Australian Dollar Falls on Thursday as Commodity Prices Sink

Despite the stock market regaining some level of stability, the Australian dollar, Kiwi, and Loonie currently exhibit notable weakness, as the AUD / USD falls to the 0.6870 area.

This weakness comes as a commodity and energy prices drop amid recession fears, dragging the commodity-based currencies lower. Copper currently trades at its lowest level since March 2021, while iron ore prices have slumped by over 15% in the last two weeks.

As of the mid-London session on Thursday, the Japanese yen had the strongest performance today, followed by the Euro and Swiss Franc. The dollar and Pound Sterling traded on mixed sentiment.

On inflation, Philadelphia Fed President Patrick Harker recently affirmed that the bank’s interest rate should sit around 3% by the end of the year, adding that the Fed would then be able to assess how much more monetary policy tightening is needed to curb inflation.

Speaking at a conference held by the regional Federal Reserve, Harker noted: “We don’t have to overreact in terms of the fed funds rate.” He added: “We need to get above neutral again. I’d like to get above three, but I don’t think you have to accelerate rapidly beyond that, at this point, until we get a better understanding of what exactly the quantitative tightening is doing. ”

Australian Economy Showing Positive Growth Indications

In Australia, PMI Manufacturing data came in higher at 55.8 in June, from 55.7 recorded in May. Meanwhile, PMI Services dropped from 53.2 to 52.6, while PMI Composite dropped from 52.9 to 52.6.

Commenting on the performance of the Australian economy, Laura Denman, an economist at S&P Global Market Intelligence, noted:

“Expansion across Australia’s private sector economy continued in June, according to the S&P Global Flash Australia Composite PMI. The easing of COVID-19 policies and opening of international borders has encouraged growth in demand, especially overseas. Stronger demand conditions had a positive influence on other areas of the economy, with employment levels continuing to rise at a solid rate. ”

She added:

“That said, firms have taken advantage of rising demand levels and passed through higher costs to their selling prices at a substantial pace. With interest rates rising to contain rapid price pressures, as well as a fading boost to economic activity post-lockdown, downside risks to the Australian economy have increased. ”

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