Since opening of today’s trading session the pair AUD/USD continued to decline. On 3 May RBA has lowered interest rate to the level of 1.75% for the first time this year. Market participants incorporate in price another reduction in the interest rate before the end of this year. Some economists believe that Central Bank of Australia will continue to lower interest rate in 2017. Recently, RBA has downgraded inflation forecast for 2016 by 2%. The Bank believes that inflation is unlikely to reach the target of 2-3% in the next two years. In Q1 of 2016 Australia has faced deflation for the first time since 2008.
According to the data released yesterday, the ratio of workforce and the total population fell in April (64.8% against 64.9% in March), new jobs in April increased by 10800 against the forecast of 12000 and 25700 in March. This data along with the reduction in the number of worked hours by 17.9 million, shows the decline in employment rate.
The Australian dollar will remain under pressure due to the decline in prices of metals and iron ore, which is the main items export in the country. The price of ore with the iron content of 62% fell by 7%, to three-month lows, below the level of 50 dollars per ton.
The rise in expectations of the interest rate increase in the USA in June has a negative impact on investors’ risk appetite, putting pressure on the stock market and commodity currencies, including the AUD.
The AUD will be under pressure from some fundamental factors, including the difference in the monetary policies of the US fed and RBA.
It is possible that by the end of this month the pair AUD/USD will reach 0.7000, as only 150 points are left before this level. The decline in the pair is likely to continue.