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AUD/USD falls below 0.7070 despite a positive Services PMI from Caixin

Alina Haynes

Feb 03, 2023 15:29

Despite the release of good Caixin Manufacturing PMI (January) data from IHS Markit, the AUD/USD pair has established a new daily low at 0.7064. The economic data came in at 52.9, which is significantly higher than the consensus estimate of 47.3 and the prior report of 48.0. China's Services PMI has stayed upbeat despite the Lunar New Year celebrations in the last week of January.

 

Notable are the facts that Australia is China's largest trading partner and the Australian Dollar is its currency.

 

The Australian Dollar is likely to be influenced by the Reserve Bank of Australia's (RBA) anticipated interest rate announcement on Tuesday. In view of the unexpected rise in the Australian Consumer Price Index (CPI) to 7.8% in the fourth quarter of CY2022, RBA Governor Philip Lowe may maintain his aggressive stance regarding interest rates.

 

Deutsche Bank Australia analysts believe that the RBA will likely hike the Official Cash Rate (OCR) to 4.1%, citing the most recent inflation update, which revealed a slightly higher-than-anticipated 7.8% increase in the CPI. Forbes Advisor states, "While the RBA will likely move more slowly in 2023 than it did in 2022, we now anticipate four additional 25 basis point hikes in 2019: 25 basis points in February and March, and 25 basis points at the May and August meetings."

 

In the meanwhile, investors have been risk-averse due to rising anxiety preceding the United States' Nonfarm Payrolls (NFP) data release. Futures on the S&P500 and other perceived-risk assets are under heavy pressure. The US Dollar Index (DXY) has rebounded to approximately 101.50 after a corrective move and is expected to remain under the hands of bulls moving forward. In anticipation that the Federal Reserve (Fed) may suspend its policy tightening, 10-year US Treasury yields have fallen to approximately 3.38 percent.


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