AUD/USD Exchange Rate Drops -0.3% as Australian Deputy PM Steps Down
The Australian Dollar to US Dollar (AUD/USD) exchange rate has declined on 23rd February, following the news that Barnaby Joyce is resigning as Deputy Prime Minister.
Mr Joyce, who led the National Party since 2016 and was Deputy PM since 2017, has announced that he will be stepping down under the pressure of multiple scandals.
Superficially, Mr Joyce’s departure doesn’t change the composition of the current coalition government, so a near-term national election isn’t on the cards.
This is because the beleaguered Joyce is staying on as a backbench MP, thereby preserving the coalition’s slender majority in Parliament.
The resignation is still a significant event in the Liberal-National partnership, however, as it has lowered confidence in the current government.
Signs of Iron Ore Price Dip Push AUD/USD Exchange Rate Lower
The Australian Dollar has remained subdued against the US Dollar today, with reports of falling iron ore prices also dragging on the AUD/USD exchange rate.
Iron ore is a key export from Australia and with prices dropping off, this means worse conditions for AU exporters and ultimately national revenues from taxation.
This is partly blamed on Chinese government policy to improve air quality – in a bid to reduce pollution, the government occasionally shuts down steel factories.
In turn, this means lower demand for Australian iron ore, which increases surpluses of the resource and lowers the global market price.
US Dollar to Australian Dollar Exchange Rate Rises after Positive Forecast from Fed’s Bostic
Following US Dollar losses in the wake of contrasting Federal Reserve messages, the USD/AUD exchange rate has since recovered on additional Fed news.
Federal Reserve Bank of Atlanta President Raphael Bostic has spoken in favour of increasing the pace of interest rate hikes in the future, saying;
‘[We are in] an increasing-rate environment, and are in the midst of a carefully-calibrated return to a more normal Fed footing, which includes the gradual reduction in our balance sheet.
Banks have anticipated the increase in rates and were really excited about the prospects of higher returns, keeping in mind the need to manage interest-rate risk.
Our most recent GDPNow estimate projects growth of 3.2% per cent in Q1 2018, which is a lot more than it was Q1 2017, so things continue to look up’.
Australian Dollar to US Dollar Exchange Rate Forecast: AUD/USD Dip possible on Manufacturing Reading
In the coming week, the Australian Dollar to US Dollar exchange rate could be affected by the announcement of the AIG manufacturing index on Wednesday.
This measure of manufacturing sector activity is tipped to show a minor decline in February, which may be enough to trigger AUD/USD exchange rate losses.
More immediately, the US Dollar could be further affected by speeches from Federal Reserve officials today.
If these policymakers suggest that the US will see a fast pace of interest rate hikes in the future (and benefit from them), the US Dollar could rise in value.