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Market Update 06/02/2025

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

■ The AUD/USD pair saw a modest increase, approaching 0.6300 during the night session, as the greenback lost some ground. Both nations have now implemented reciprocal tariffs. Investors are eagerly anticipating news of a potential dialogue between Beijing and Washington, hoping for a breakthrough that could lead to tariff reductions or eliminations. However, as the wait for this crucial communication drags on, market sentiment regarding a US-China trade accord may sour, potentially causing the AUD/USD to retreat once more.

 

■ The dollar index experienced a slight dip, hovering around 107.5 points overnight. Wall Street saw a rebound in equity prices. Yields on US Treasuries declined across all maturities, with longer-term bonds leading the downturn. The benchmark 10-year yield shed 10 basis points, settling near 4.42%. January’s ADP employment report showed a robust increase of 183,000 jobs, surpassing the consensus forecast of 150,000. This strong ADP figure might elevate market expectations for the upcoming non-farm payrolls data later this week.

 

■ AUD/CNH mirrored the AUD/USD’s upward movement, reaching approximately 4.5800 overnight. In its initial fixing following the Lunar New Year holiday, the People’s Bank of China maintained its supportive stance towards the yuan. President Trump has expressed a desire for a significantly weaker dollar, which would imply a stronger yuan. Market analysts anticipate that the PBoC may eventually permit a gradual yuan depreciation to counteract the effects of US tariffs. Nevertheless, market forces are exerting upward pressure on the USD/CNY pair.

 

■ The AUD/EUR pair inched up slightly, touching around 0.6040 overnight. French Prime Minister Bayrou successfully weathered a no-confidence vote yesterday, ensuring the adoption of his 2025 budget proposals. The ECB’s wage growth projections indicate a sharp decline, potentially bolstering the central bank’s confidence in achieving its 2% annual inflation target this year. However, the possibility of US tariffs on European imports – and potential EU retaliation – complicates the Eurozone’s inflation outlook. ECB Chief Economist Philip Lane emphasized the need to balance the risks of acting too slowly against moving too hastily, given the bidirectional nature of inflation risks.

 

■ AUD/GBP climbed to approximately 0.5030 overnight. The Bank of England is widely anticipated to reduce its bank rate by 25 basis points to 4.5% today (11 PM Sydney time). December’s CPI data came in lower than expected, featuring a welcome decline in services inflation. Other economic indicators suggest a softening UK economy.

Mid-market rates.

Currency Pair Mid-market Rate
AUD/USD 0.6284
AUD/NZD 1.1053
AUD/JPY 95.87
AUD/CNY 4.5746
AUD/EUR 0.6040
AUD/GBP 0.5026
AUD/HKD 4.8911

 

Chart of the day

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