Weaker US retail sales data reduces expectations for a September Fed rate increase, lifting the Australian dollar against the USD.
The AUD/USD pair climbed to near 0.7090 in early Asian trading, supported by a softer US dollar as Fed rate hike expectations fade. US retail sales fell 0.6% month-over-month in July, missing forecasts of a 0.1% gain and marking a sharp decline from June’s 0.2% rise.
Markets now price a 33.1% chance of a September Fed rate hike, down from around 50% last week, according to the CME FedWatch tool. Year-over-year retail sales slowed to 5.0% in July from a revised 6.8% in June. Traders await China’s retail sales and industrial production data later today for further direction.
Geopolitical tensions in the Middle East could weigh on the pair if escalation drives demand for the safe-haven USD. The RBA has signaled patience on policy tightening, citing delayed effects of past hikes on inflation and economic activity.