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CAFX Market Update 30/1/2023

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 Aussie dollar is slightly weaker this morning after jumping to a seven-month high (0.7142) against the US dollar, thanks to surprisingly hot Aussie inflation data. At the time of writing, the AUD/USD pair is trading at 0.7105, up 0.05%.

Based on last week’s performance, the Aussie dollar should enjoy some healthy upside momentum. That said, markets will likely experience a heightened level of volatility this week as investors brace for a stream of highly important and risky data releases.

On Tuesday, we’ll get a look at Aussie retail sales data, which will provide insight into consumer spending and the country’s overall economic activity. More importantly, this week’s economic docket will feature interest rate decisions from the US Fed, BoE and ECB.

It is widely expected that the Fed will slow its pace of rate hikes to deliver a 25 basis point increase this Thursday, following signs of cooling inflation. Meanwhile, markets predict the ECB and BoE will roll out larger rate increases, with a high conviction of a 0.5 percentage point hike from both central banks. Considering the Aussie dollar’s steady upward trajectory over the past week has been underpinned by expectations for subsiding Fed hikes and a narrowing of rate differentials, global markets are likely to adopt a cautious stance ahead of the trio of interest rate decisions.