Market Update 07/02/2025

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 edged up slightly overnight and is currently trading near 0.6280. A weaker USD and stronger European equities supported the AUD/USD. The pair is expected to remain quiet until the release of US non-farm payrolls data tonight.

■ The USD weakened overnight and is currently trading near 107.7 points. The S&P 500 index fell by 0.2%, while US Treasury yields rose a few basis points across the curve. US Treasury Secretary Scott Bessent stated that the Trump administration is focused on lowering the 10-year Treasury yield. He mentioned that they are not calling for the FOMC to lower rates and affirmed their “strong dollar” policy. Tonight’s focus is on the non-farm payrolls data (12:30 AM Sydney time). The consensus expectation is for an increase of 175,000 jobs in January. However, the strong ADP employment report may have raised the market’s “true” expectations for the non-farm payrolls. Tonight’s report will also include annual benchmark revisions through March 2024. Earlier preliminary estimates showed a significant downward revision of 818,000, but US economists now expect tonight’s downward revisions to be smaller, in the range of 600,000 to 700,000.

■ The AUD/GBP pair strengthened overnight and is currently trading near 0.5050. The pair was boosted by the Bank of England’s (BoE) more dovish tone. The BoE cut interest rates by 25 basis points. Seven members voted for a 25bp cut, while two voted for a larger 50bp cut. Governor Bailey noted that core inflation is moderating and further rate cuts are expected. Markets are fully pricing in the next cut in May, with a total of 2.5 more cuts expected by year-end.

■ The AUD/EUR pair edged higher and is currently trading near 0.6050. The ECB will publish new estimates tonight for what they consider to be the neutral interest rate in the Eurozone. Current estimates range from 1.75% to 3.00%. ECB President Lagarde previously indicated a range of 1.75% to 2.25%. The ECB’s deposit rate is currently at 2.75%.

■ The AUD/JPY pair fell to near 95 in overnight trading. Expectations of another Bank of Japan (BoJ) interest rate hike are supporting the yen. Yesterday, BoJ board member Tamura stated that “the short-term interest rate should be at the 1% level by the second half of fiscal 2025”. Markets are now fully pricing in a BoJ rate hike in September.

Here are the latest mid-market rates:

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