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Positive Sentiment Persists For AUD/USD Below The Mid-0.6300s In Advance Of Australian Retail Sales
AUD/USD maintains its gains near 0.6339 early on Monday. Core PCE in the United States decreased to 3.7% YoY from 3.8% previously, while headline PCE remained unchanged at 3.4%. The markets anticipate that at its November 7 meeting, the Reserve Bank of Australia (RBA) will increase the cash rate. This week's Fed rate decision will be an event that is keenly observed.
Beginning the week on a positive note, the AUD/USD pair trades in the early Asian session on Monday, below the mid-0.6300s. The dollar's (USD) weakness provides some assistance to the pair. Nevertheless, escalating geopolitical tensions in the Middle East could incite market risk aversion and depreciate hazardous assets such as the Australian Dollar (AUD). Presently trading at approximately 0.6339, the pair is up 0.06% on the day.
It is anticipated that the Federal Reserve (Fed) will maintain its current interest rates following its two-day meeting on Wednesday. Inflation remains excessively high, according to Fed Chair Jerome Powell, who raised expectations for another rate hike by the end of the year late last month. However, higher longer-term interest rate expectations in the United States could strengthen the USD and serve as a headwind for the AUD/USD pair.
The Fed's preferred inflation gauge, the Core Personal Consumption Expenditures Price Index (PCE), decreased to 3.7% YoY on Friday from 3.8%. The headline PCE remained unchanged at 3.4%. Furthermore, the University of Michigan Consumer Index exceeded initial projections by 63.8 points, as opposed to 63.0 points. Nevertheless, these statistics were insufficient to strengthen the Greenback in comparison to its competitors.
Conversely, the most recent inflation data from Australia conformed to the forecasts of policymakers, and the markets expect the Reserve Bank of Australia (RBA) to increase the cash rate by 25 basis points (bps) to 4.35% during its November 7 meeting. Last week, RBA Governor Michele Bullock remarked that the CPI was marginally higher than anticipated, but roughly where we had anticipated it to land. Bullock added that the objective of the central bank is to decelerate the economy without precipitating a recession.
Moreover, indications of economic development in China would bolster market sentiment and potentially cause the China proxy AUD to appreciate this week. On Tuesday, market participants will closely monitor the Chinese PMI data.
Later on Monday, Australian Retail Sales for the month of September are anticipated to increase by 0.3%, up from the previous estimate of a 0.2% increase. The US CB Consumer Confidence Report is scheduled to be released on Tuesday of this week. The focus of attention this week will be the Fed policy meeting, which has the potential to incite market volatility. Traders will identify trading opportunities in the AUD/USD pair in response to the events.
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