The Australian dollar has edged lower on Thursday. In the North American session, AUD/USD is trading at 0.6198, down 0.28% on the day.
Australian retail sales point to cautious consumers
Australian retail sales rose 0.8% m/m in November 2024, higher than the downwardly revised 0.5% gain in October but shy of the market estimate of 1%. This was the strongest pace since January but there was some disappointment that pre-Christmas and Black Friday discounts didn’t result in stronger sales. Despite retailer incentives, consumers remained cautious, as high inflation and elevated interest rates have squeezed households and dampened consumer spending.
The Australian economy is struggling and today’s weaker-than-expected retail sales report along with the drop in underlying inflation in December is bolstering the case for a February rate cut. The Reserve Bank of Australia has highlighted household spending and inflation as key factors in its rate decisions and the central bank hasn’t budged from a cash rate of 4.35% for over a year. The RBA is sounding less hawkish but hasn’t hinted at the timeline for a rate cut, saying rate decisions will be data-dependent. The RBA hold its first meeting of the year on Feb. 18 and the money markets have priced in a rate cut at over 70%.
Fed minutes: Concern about Trump
The minutes of the Federal Reserve’s December meeting indicated that members were concerned about the upside risks of inflation due to President-elect Trump’s policies. Members stated that inflation could rise to “the likely effects of potential changes in trade and immigration policy”. Trump has pledged to slap tariffs on China and other US trading partners and has threatened the mass deportation of illegal immigrants.
The minutes also indicated that the Fed plans to “go slow” with further rate cuts in 2025, after starting the easing cycle last September with an oversized 50-basis point cut. The Fed’s December rate projection calls for only two rate cuts in 2025, down from four in the September forecast.
AUD/USD Technical
- AUD/USD tested support at 0.6189 earlier. Below, there is support at 0.6161
- 0.6215 and 0.6243 are the next resistance lines
