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The S&P GSCI Directory reversed its 2011 gains in the last six consecutive trading sessions. As a content of fact, the index tracking 24 commodities insolvent down 7.6% from a high of 684.15 on April 30th to a more than four-month low low of 634.25 during yesterday's business session. This downturn in commodity prices can be explained on the one will by headlines from the Euro area, as markets seem to be pricing in a encourage round of elections in Greece as well as a probable EU take a walk. On the other hand, the marked slowdown of commodity-focused economies such as China -see Newsletter May 14- pushed prices earlier small in light of atrophied demand and lower infrastructure investments. From the outlandish exchange perspective, the Australian dollar having seasoned a 34% appreciation during the last three years traded downgrade than parity against the dollar for the first time since December 20. The currency matched set is characterized by high commodity and risk betas, and so it is consequent to witness the unwinding of the so-called Aussie in times where investors are hazard-off and commodities reversing their yearly gains. The mystery for Australia remains if and how long it can withstand a tart reversal in its commodity exports. The pattern of a two-go economy has long been established since the boom in commodities during the career decade, as can be seen through the uneven development between its resources sector and the remains of the economy. Rio Tinto's Albanese even mentioned last week a 'three-fly economy' with iron-ore operations contributing to three-quarters of the retinue's operations and so detaching from the remaining revenue sectors. According to The Exchequer, a deterioration of Australia's current account shortfall in the coming years could result from a rise in imports (remarkably non-domestic equipment), outbound tourism and cut earnings as commodity exports and prices deaden. What's more, the global supply of minerals has been rising as non-Australian firms such as the recently merged Glencore and Xstrata spend in new mines on the African continent, which will provide them with a less costly way to spasm the Asian commodities market. Monetary way meeting minutes were released yesterday evening by the RBA explaining the largest cut in the cash rate for the last three years. The spirit was dovish in that the bank believes non-mining sectors endure to be decoupled from the rest of the economy even though the latest unemployment mentioned was at a surprise low of 4.9%. RBA also cut its forecast on growth forecasting that it would phrasing at 3% against February's 3.5% prediction. As for inflation, it will scraps in the 'lower half of the target range', creating an considerate environment to further cut interest rates, as lending rates are still imposing and affecting the housing market. We believe the AUD will still be reactive to hazard-appetite regardless of the slump in commodities. We envisage further cuts in the interest rate as minutes signaled that the rates are still impressive, and so the AUD would continue to depreciate from February highs. The next levels to the downside are 0.9895 (December low), and 0.9740 (November and October lows).
“The US observations now is the main focus in the forex markets, and it continues to come on the discouraging side,” said Amelia Bourdeau, a currency strategist at
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