Australian Dollar Continues Downward Trend Following Retail Sales Dip

Market participants are now eagerly awaiting key US economic data releases

The Australian Dollar (AUD) faced continued pressure in the markets, extending its downward correction spurred by disappointing domestic Retail Sales figures released earlier this week. Retail Sales serve as a crucial leading indicator, closely linked to inflation and growth prospects, factors that significantly influence the Reserve Bank of Australia's (RBA) stance on interest rates. Additionally, Commonwealth Bank, a major mortgage lender in Australia, adjusted its forecast for the timing of the first RBA interest rate cut. Their new projection, as reported by the Financial Review, suggests a single cut in November, indicating a more optimistic outlook for the currency. Meanwhile, the US Dollar Index (DXY) rebounded, driven by hawkish remarks from US Federal Reserve officials, signaling reluctance towards immediate rate cuts.

Market participants are now eagerly awaiting key US economic data releases, including the ADP Employment Change and ISM Manufacturing PMI, alongside the Fed's Interest Rate Decision, all of which are poised to influence market sentiment and USD movement. In Australian markets, shares saw a subdued start to Tuesday's session, with investors adopting a cautious stance ahead of the forthcoming US Federal Reserve rate decision. Only the materials sector witnessed gains, while other sectors remained largely unchanged. With the CME FedWatch Tool indicating an increased probability of the Federal Reserve maintaining interest rates in the upcoming June meeting, currently standing at 88.4%, the outlook for the AUD/USD pair faces further challenges amidst the Fed's narrative of prolonged higher rates.