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AUD strengthened on Wednesday as USD weakened.
AUD/USD was supported by hawkish signals from the Reserve Bank of Australia and weaker-than-expected US retail sales data.
US markets were closed for Juneteenth; US S&P Global PMI report will be in focus on Friday.
The Australian dollar gained momentum on Wednesday, supported by the Reserve Bank of Australia’s unchanged hawkish stance at its June meeting. Markets pushed down expectations for RBA rate cuts and see an easing cycle starting in 2025, which continued to boost the AUD. In addition, weaker-than-expected retail sales prompted the Federal Reserve to cut rates later this year, which weighed on the AUD across the board.
US markets will be closed on Wednesday for Juneteenth. Investors will focus on the US S&P Global Manufacturing and Services PMI reports to be released this weekend. Any expansion in US business activity could boost the US dollar (USD) and limit upside for AUD/USD.
Daily Market Brief: RBA’s hawkish stance and weak US data extend AUD’s rally
The Reserve Bank of Australia held the official cash rate (OCR) steady at 4.35% for the fifth consecutive time at its June meeting. This is the longest period of hold since the RBA’s rate hike cycle began in May 2022.
“The economic outlook remains uncertain and recent data suggest that the return of inflation to target is unlikely to be smooth sailing,” the RBA board noted in a statement.
It will take some time for inflation to remain in the target range for a sustained period, and recent data reinforce the need to remain vigilant to upside risks to inflation, the statement said.
The U.S. Commerce Department reported on Tuesday that U.S. retail sales rose 0.1% month-on-month in May, below the expected value of 0.2%, following a -0.2% drop in April.
Boston Fed President Susan Collins said on Tuesday that the Federal Reserve is likely to cut interest rates one or two times later this year, but the central bank must remain patient amid volatile inflation readings, according to Reuters.
Richmond Fed President Thomas Barkin said on Tuesday he would need to analyze a few more months of economic data before considering a rate cut.
