- AUD/USD advanced around 0.25% on Monday, paring some of last Friday’s losses.
- Last week’s Fed rhetoric capped AUD/USD gains.
- Australian retail sales were better than expected, boosted by tourism.
AUD/USD recovers the 0.6900 figure after hitting a six-week low around 0.6840 in the American session, amid a risk-off environment, spurred by Powell’s Fed hawkish rhetoric on Friday last year, which sent US equities down almost 3% on average, between the S&P 500, the Nasdaq and the Dow.
AUD/USD opened below last Friday’s close and approached 0.6840 before regaining some ground, reaching a daily high at 0.6925 before settling around current spot prices. At the time of writing, the AUD/USD is trading at 0.6907, up almost 1% from its opening price.
AUD/USD rises on positive US data and US dollar weakness
The Australian dollar’s gains come courtesy of a weaker US dollar, as the US Dollar Index shows, down 0.09% to 108.736. Additionally, commodity prices, led by oil and iron ore, are supporting commodity-linked currencies such as the AUD, NZD and CAD.
US equities extend their losses after Jerome Powell’s statements last Friday, in which he stated that the Fed’s main objective is to bring inflation to its 2% target, even if that means slow growth and “pain for homes and businesses.” He added that “without price stability, the economy doesn’t work for anyone.”
On Friday, US economic data revealed that the core PCE deflator, the Fed’s favorite measure of inflation, rose 0.1% mom, less than estimated. Nonetheless, the three-month annualized figure remains high, and while Powell welcomed the data, he reiterated that the Fed needs to go into tightening territory. Later in the day, UoM Consumer Sentiment improved to 58.2, reflecting lower gasoline prices.
In the Asian session, Australian retail sales for July, in its preliminary reading, were better than estimated, rising 1.3%, which strengthened the AUD/USD. According to ANZ analysts, Australian sales were bolstered by tourism and returning residents.
“Last month we noted that very negative net arrivals in June may have been the key to weak retail sales growth, rather than the start of a slowdown in consumption. We will be watching net arrivals as a signal for the future.” short-term retail sales growth as the two data sets have moved together in recent months,” the ANZ analysts wrote.
AUD/USD Key Technical Levels
Source: Fx Street
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