- AUD/USD is showing a rebound move from 0.6900 as Australian Retail Sales contracted by 0.2% vs. -0.6% the expectations.
- A 25 bps interest rate hike is expected from the RBA this week.
- A sheer rebound in the US Treasury yields has strengthened the risk-aversion theme.
The AUD/USD pair has attempted a recovery of around 0.6900 as the Australian Bureau of Statistics has reported a lower-than-expected contraction in the Retail Sales data for the fourth quarter of CY2022. The economic data has contracted by 0.2% while the street was expected a contraction by 0.6%.
The major catalyst that will trigger volatility in the Australian Dollar will be the announcement of the interest rate decision by the Reserve Bank of Australia (RBA), which is scheduled for Tuesday. Projections for policy stance are extremely hawkish as Australian Consumer Price Index (CPI) has yet not confirmed its peak. The Australian inflation recorded fresh highs of 7.8% in the fourth quarter of CY2022.
Analyst at Deutsche Bank Australia sees the RBA likely to drive the Official Cash Rate (OCR) to 4.1%, citing the most recent inflation update of a 7.8% increase in the CPI, which was slightly higher than expected. “While the RBA will likely move more slowly in 2023 than it did in 2022, we now expect four more 25 basis point hikes this year: 25 basis points in each of February and March, and 25 basis points each at the May and August meetings” as reported by Forbes Advisor.
Meanwhile, the risk profile is supporting the safe-haven assets after a gigantic jump in the United States Nonfarm Payrolls (NFP) numbers. The US Dollar Index (DXY) is aiming to shift its auction profile above 102.50. S&P500 futures have continued their downside move in the Asian session, portraying a further decline in the risk appetite of the market participants. The 10-year US Treasury yields have escalated further to near 3.57%.
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