Anna 
For the second consecutive session on Monday, the Australian Dollar (AUD) has extended its gains against the US Dollar (USD) as overall market risk appetite improved, despite diminishing expectations for Federal Reserve interest rate cuts. Investors are eagerly anticipating Australia’s Retail Sales data on Tuesday, which is expected to show growth of 0.3% in April, rebounding from the previous decline of 0.4%.
The Australian Dollar may see further appreciation following the release of the latest Reserve Bank of Australia (RBA) meeting minutes, which indicated that the board found it challenging to predict future changes in the cash rate. The minutes also acknowledged that recent data increases the likelihood of inflation persisting above the 2-3% target for an extended period.
Conversely, the US Dollar (USD) weakened after the release of the University of Michigan’s 5-year Consumer Inflation Expectations for May on Friday, which eased slightly to 3.0%, below the forecasted 3.1%. Although the Consumer Sentiment Index was revised upward to 69.1 from a preliminary reading of 67.4, it still marked the lowest level in six months. These figures likely contributed to strengthening investors’ sentiment regarding potential rate cuts by the Federal Reserve.
According to the CME FedWatch Tool, the probability of the Federal Reserve implementing a 25 basis-point rate cut in September has decreased to 44.9% from 49.0% a week earlier. It’s worth noting that the US market will be closed on Monday due to the Memorial Day bank holiday.
