The Australian dollar rises above 0.7100 as softer US inflation and retail sales data reduce Fed rate hike bets.
The AUD/USD pair extended gains to a fresh high since June 5, breaching the 0.7100 level as persistent US dollar selling countered weak Chinese economic data. The move follows a slump in the USD Index to its lowest in over two months, driven by cooling US inflation and a sharp 0.6% drop in July retail sales—the largest monthly decline since May 2025.
China’s July data underperformed expectations, with retail sales rising just 0.6% year-over-year, below the 1.5% forecast, while industrial production grew 4.5%, missing the 5.3% consensus. Fixed asset investment also contracted more than anticipated, falling 6.7% year-to-date. Despite the weak China print, the AUD found support from a softer USD outlook.
Markets reacted by scaling back expectations for an immediate Fed rate hike, as US consumer sentiment dipped to 51 in August from 55.2 in July. The shift in Fed policy bets overshadowed geopolitical risks, limiting safe-haven demand for the dollar.