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CAFX Market Update 06/2/2023

Welcome to our daily market update, where we help keep you informed on the latest happenings in the world of FX.
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Following a series of better-than-anticipated US economic data releases, the Aussie dollar declined sharply by 2.2% to move towards the 0.6900 handle. As of writing, the AUD/USD pair is trading at 0.68951, as analysts believed the pair’s recent sharp rise was overdone.

According to the US Department of Labour, the US job market is off to a strong start this year, with Nonfarm Payrolls surging to 517K, smashing estimates of 193K. The Unemployment Rate dipped to 3.4%, the lowest rate since 1969, compared to the previous month’s 3.5% and forecasted 3.6% rate. Private Nonfarm Payrolls came in at a whopping 443K versus an expectation of only 190K. As a further sign of US economic strength, the ISM Non-Manufacturing PMI for January increased to 55.2 versus 50.4 estimate and a prior reading of 49.2.

With surprisingly high figures reflecting a strong US economy, this could give the Fed the green light to maintain its hawkish tone and hike rates. Against this backdrop, the US dollar gained strong upside momentum, with the US Dollar Index (DXY) back on the 102 handle.

Investors will watch the Fed’s Powell speech closely this week as they hope to revaluate expectations regarding how hawkish the Fed might need to curb inflation.

Other major news this week includes the RBA’s rate decision on Tuesday. The consensus is for another quarter-point rise after the annual rate of inflation shot to its highest level in 33 years last quarter at 7.8%, undermining the RBA’s aggressive monetary tightening.


Australia Retail Sales (MoM)
United Kingdom Construction PMI (Jan)
Eurozone Retail Sales (MoM) (Dec)