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CAFX Market Update 25/01/2022

Welcome to our daily market update where we help keep you informed on the latest happenings in the world of FX and show you what this means for the Mighty Aussie Dollar.
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

Key Data Being Released Today
Australia: CPI (QoQ +1% expected)
South Korea: 4Q GDP (1.1% expected)

Macro Report
Last night saw increased levels of volatility across all markets.  In currencies pairs, majors were generally weaker against the US dollar in European and US trade.  The Aussie dollar fell from highs near US71.80 cents to US70.90 cents and was near US71.40 cents in late US trade.  The Euro fell from near US$1.1335 to US$1.1290 but was back near US$1.1320 in late US trade.
Europe led a tone of risk-off sentiment with investors fearing a Russian attack on Ukraine. Earlier in the day, governments including that of Australia, urging citizens to leave the country immediately.  In a further sign that geopolitical tensions are heating up, NATO announced it was putting forces on standby to prepare for a potential invasion.
European stock markets were weaker across the board, the travel & leisure sector fell by 5.4% and technology fell by 5.8%. The panEuropean STOXX 600 index fell by 3.8% – the worst day since June 2020. The German Dax index also fell by 3.8%. And the UK FTSE index fell by 2.6%.
In European economic data, the PMI figures released revealed the euro zone economic recovery weakened this month, despite an upturn in Germany where factories benefited from an easing in supply chain bottlenecks, as renewed restrictions put a dent in the bloc’s dominant services industry.
Overshadowing what was already a significant evening, was the recovery in US equities, the S&P 500 rebounded after tumbling as much as 4% earlier in the day.  The same index earlier came close to confirming a correction by appearing on track to close more than 10% down from its most recent all-time.
In US economic data, the Markit manufacturing purchasing managers index fell from 57.7 to 55.0 in January (survey: 56.7). The services index eased from 57.6 to 50.9 (survey: 55.0).  This PMI’s, similar to Europe, being impacted by a surge in COVID-19 infections and resultant worker shortages.  The theme of demand for goods over services continues to seem evident when looking at the breakdown across both Europe and the US.
Looking ahead to today and beyond, all eyes will be on the Australian Q4 CPI figures this morning, followed by the Fed decision on Wednesday.  Money markets have fully priced in a 25-basis-point rate hike in March from the Fed and are wagering on a total of four such increases in 2022.

AUD/USD Daily Chart


Major Global Markets

Currencies Level Change (%)
AUD/USD 0.7144 -0.01
AUD/JPY 81.413 -0.02
AUD/CNH 4.5253 0.00
DXY 95.8840 0.26
Rates Yield (%) Change (%)
US 10 Year 1.771 0.01
Aus 10 year 1.96 0.00
Equities Level Change (%)
S&P 500 4410 0.28
NASDAQ 14510 0.49
ASX 200 7140 -0.51
Commodities Level Change (%)
Iron Ore 124.92 3.06
Gold 1843.05 -0.00
Brent Crude oil 87.07 -0.93