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CAFX Market Update 03/1/2023

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
If you have any questions or would like anything further explained, please don’t hesitate to reach out to your account manager or email info@cafx.com

Macro Report

Following a significant rally into year-end, the Aussie dollar remains above the 0.6800 level ahead of today’s Caixin Manufacturing PMI data.

Looking forward, the spotlight is on China’s manufacturing sector. Data will likely set the tone for the AUD/USD pair and could provide more direction for markets. China’s Caixin Manufacturing Purchasing Managers Index (PMI) is forecasted to remain in contraction territory for a fifth consecutive month, dropping to 48.8 in December from 49.4 the prior month.

On the US front, markets await the highly anticipated FOMC meeting minutes. Fed Chair Powell has indicated a shift to smaller rate hikes this year but will likely raise the terminal rate. The Fed Minutes should reveal the thinking behind this “slower but higher” approach and provide insight into December’s monetary policy decision. Markets will also be paying attention to economic projections and policy actions ahead.

The US Dollar Index (DXY) has struggled to make gains in the new year as it remains pressured near the seven-month low of 103.40. The US dollar faced immense pressure in the final days of 2022 as safe-haven assets lost their appeal amid a risk-on market mood. With this, the bears are set to stay, but the downside will likely be limited for the US dollar.

Key Data Being Released Today

China Caixin Manufacturing PMI (Dec)
United Kingdom Manufacturing PMI (Dec)