The Australian dollar has been one of the more heavily shorted currencies in recent months given that the Reserve Bank of Australia has consistently talked the Aussie down and the commodity complex has been steadily grinding lower. The Australian mining industry has been suffering as the Chinese economy continues to rapidly slow down. Iron ore prices are now around 70% lower than they were four years ago and 20% down in 2015 alone as demand for steel has fallen off a cliff. The price practically mirrors AUDUSD, but following the overnight RBA rate announcement and a strong retail sales figure, both the Aussie and iron ore prices have bounced. A removal of the reference to a weaker Aussie being good for the economy saw shorts squeezed and AUDUSD has rallied over 100 pips since the release of the retail sales and subsequent RBA meeting. This bounce however may not be enough to reverse sentiment towards the Aussie, which for as long as pressure remains on commodity prices, is likely to stay bearish.
Sterling continues to be in focus as we approach Thursday’s big day for the BOE. This morning sees the release of the construction PMI which has been a bright spot for the UK economy for some time and a small rise from 58.1 to 58.5 is expected.
Further reading:
AUDUSD
Sterling continues to be in focus
