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CAFX Market Update 12/1/2023

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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The AUD/USD has climbed above the 0.69 level to a five-month high aided by local data, broader risk-on market sentiment and a weakened USD as investors scale back aggressive Fed bets.

The RBA released Aussie CPI data yesterday, indicating annual inflation re-accelerated to 7.3% in November, as forecasted, after easing to 6.9% in October. Resilient demand is also evident in the country’s retail sales, which surged to 1.4% (MoM) in November, well above the 0.6% consensus and -0.2% in the prior month. Data released boosted bets for larger-sized rate hikes from the RBA after the central bank made its shift to 25 basis points.

While domestic data has been strong, the AUD/USD pair has struggled to hold onto its gains. Ahead of US inflation data, the pair is clinging to the 0.6900 level, trading at 0.69051 at the latest, up 0.27%.

Headline US CPI reading for December, due out overnight, is projected to print -0.1%, with no change on a monthly basis from the prior month. This is expected to leave headline annual growth at 6.5%, down from 7.1% in November. The core rate, which excludes volatile food and energy, is projected to have risen 5.7% year-on-year in December, down from 6.0% in the prior month. Data will be crucial in shaping market expectations, as hotter-than-anticipated CPI could push rates and the dollar higher.


Australia Trade Balance (Nov)
United States CPI (Dec)
    PPI (Dec)