Upbeat Australia Retail Sales Report To Fuel Bullish AUD/USD Series

AUD/USD pares the weakness following the larger-than-expected slowdown in China’s Consumer Price Index (CPI), and fresh data prints coming out of Australia may fuel the recent series of higher highs & lows in the exchange rate as Retail Sales are projected to increase another 0.3% in November.

Image of daily change for major currencies


Image of daily change for audusd

The AUD/USD rebound following the currency market flash-crash may get a boost as the underlying strength in private-sector consumption puts pressure on the Reserve Bank of Australia (RBA) to alter the monetary policy outlook, and the central bank may adopt a more upbeat tone at the next meeting on February 5 especially as U.S. President Donald Trump tweets that ‘talks with China are going very well’.

The easing threat of a U.S.-China trade war should keep the Australian dollar afloat as it removes a major downside risk for the Asia/Pacific region, and the central bank may start to prepare households and businesses for a less-accommodative stance as ‘members continued to agree that the next move in the cash rate was more likely to be an increase than a decrease’.

(Click on image to enlarge)

Image of RBA official cash rate

However, it remains to be seen if Governor Philip Lowe & Co. will lift the official cash rate (OCR) off of the record-low in 2019 as ‘there was no strong case for a near-term adjustment in monetary policy,’ and the RBA’s wait-and-see approach may continue to rattle the broader outlook for AUD/USD as the Federal Reserve removes its non-standard measures.

Even though the Federal Open Market Committee (FOMC) appears to be approaching the end of the hiking-cycle, fresh comments from Chairman Jerome Powell suggests the Fed will continue to unload its asset-holdings in 2019 as the balance sheet is expected to return to a ‘more normal level.’ The quantitative tightening (QT) is likely to drag on aussie-dollar rate as long as the RBA remains reluctant to implement higher interest rates, but the monthly opening range raises the risk for a larger correction as the exchange rate initiates a series of higher highs & lows.

1 2
View single page >> |

Disclosure: Do you want to see how retail traders are currently trading the US Dollar? Check out our IG Client Sentiment ...

How did you like this article? Let us know so we can better customize your reading experience. Users' ratings are only visible to themselves.


Leave a comment to automatically be entered into our contest to win a free Echo Show.