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AUD USD Exchange Rate Dips as Tax Deal Strengthens US Dollar

US Dollar Exchange Rates

The Australian Dollar US Dollar (AUD USD) exchange rate fell by almost half a cent on Monday as investors welcomed the passing of Trump’s tax proposals over the weekend.

US Dollar Lifted by Passing of Trump Tax Bill

The US Dollar jumped against the Australian Dollar on Monday, as the ‘Greenback was lifted by the news that the US Senate had voted to pass Trump’s long awaited tax reforms.

The passing of the tax proposals should open the way for the President to sign in substantive tax cuts by the end of the year.

Markets are hopeful that the sizable corporate tax cuts will help to foster growth in the US economy, although critics have pointed out that the tax breaks are likely to overwhelming favour the rich.

The upbeat reaction to the tax news also helped the US Dollar recover from a dip late last week in which former Trump aide, Michael Flynn pleaded guilty to lying in the FBI’s Russia investigation.

Kit Juckes at Société Générale said;

‘Where the news that Michael Flynn will plead guilty to lying to the FBI took the dollar, Treasury yields and the market mood down [on Friday], the news that the Senate passed its version of the tax bill has taken the dollar, yields and risk sentiment back up.’

Australian Dollar Losses Tempered by Rising Iron Ore Prices

However the Australian Dollar was able to stem its losses and even rally overnight on Monday thanks to the continued uptick in iron ore prices.

Iron ore returned to a bull market this week as spot prices for 62% ore jumped 3.7% to $72.68 a tonne the highest leave since mid-September.

The latest uptick in Australia’s largest export appeared to largely be driven by the Chinese government’s limits on steel production this winter, with the subsequent strengthen of steel also lifting high grade iron ore.

AUD USD Forecast: RBA to Leave Rates Unchanged?

Looking ahead movement in the AUD USD exchange rate on Tuesday will likely be dictated by the tone of the Reserve Bank of Australia’s (RBA) latest policy meeting.

While the bank is unlikely to raise rates at the meeting, an upbeat accompanying statement could help the ‘Aussie’ to trend higher.

Meanwhile the US Dollar may tumble again during the overnight session If US factory orders fell as expected in October.

Current Interbank Exchange Rates

At the time of writing the AUD USD exchange rate was trending around 0.7605 and the USD AUD exchange rate was trending around 1.3148