The Australian Dollar US Dollar (AUD USD) exchange rate was met by volatility on Thursday as markets speculate over the impact of Trump’s tax bill.
US Dollar (USD) Rocked by Tax Speculation
The US Dollar weakened during Thursday’s trading session as markets turned on the currency as analysts suggested that the US tax reforms will have limited impact.
It appears that many investors believe that the implementation of Trump’s long await tax cuts have already been priced in by markets, suggesting that the ‘Greenback’ is unlikely to be lifted if the President signs the bill into law later this week.
A research note from TD Securities read;
‘The U.S. dollar and FX markets more generally have largely been unfazed by the tax bill even though the U.S. is embarking on the biggest overhaul of the tax code since 1986, this leads us to believe that FX has largely priced in the passage of the new legislation.’
On top of this many analysts dispute the Republicans’ claims that the slashing of corporate tax will fuel miracle growth in the US economy.
Critics of the bill suggest that the bill may only prompt moderate economic growth, with many firms looking to pocket the extra profits instead of re-investing it or expanding their workforce, while the reduced tax receipts will likely see the national deficit balloon even higher.
Australian Dollar (AUD) Weakened by Gloomy Commodity Outlook
At the same time the Australian Dollar struggled to find its footing yesterday as Westpac Bank lastest commodity forecasts painted a gloomy picture of iron ore and coal markets in 2018.
While lifting its near-term forecasts for both commodities the bank was far more cautious on its long term forecast, suggesting that iron ore prices in particular could see notable losses over the coming months, falling as low as $57 a tonne by June.
AUD USD Forecast: US Durable Goods Orders to Rally?
Looking ahead the AUD USD exchange rate may tumble at the end of this week’s session as economists forecast that US Durable Goods orders will have rebounded in November.
Meanwhile a lull in domestic data and the thinned trading volumes over the Christmas period are likely to leave the Australian Dollar a little directionless until the new year.
Current Interbank Exchange Rates
At the time of writing the AUD USD exchange rate was trending around 0.7691 and the USD AUD exchange rate was trending around 1.3004