Key Points:
The Australian dollar (Symbol: AUDUSD) found strong demand as its retail sales figures for August 2024 exceeded forecasts, providing support to the currency amid a global backdrop of cautious sentiment.
Picture: AUDUSD price rises after retail sales beat expectations in August, as observed on the VT Markets app.
The AUDUSD currency pair reached $0.6928, close to its highest levels in over 19 months, after domestic data showed retail sales rebounded by 0.7% in August, surpassing expectations of 0.4%.Such positive data, coupled with optimism around the stimulus plans of China, helped buoy the Aussie dollar and its regional counterpart, the New Zealand dollar (Symbol: NZDUSD).
Australia’s close economic ties to China, especially through its vast commodity exports, mean that Chinese stimulus measures often have a significant impact on the currency. Iron ore, one of Australia’s major exports, saw prices climb to three-month peaks.
While consumer spending is picking up in Australia, such trends may also fuel inflationary pressures, something the Reserve Bank of Australia (RBA) will be closely monitoring. Despite this rebound in retail sales, inflation risks remain, and it is unlikely the RBA will rush into cutting rates.
Related content: Interest rate tug of war for central banks
The outlook for steady rates seems well-supported. Markets imply only an 18% chance of a rate cut in November, with a 71% probability of a reduction by December.
Short Term Risks and Opportunities for Aussie Traders
In the short term, traders should expect the Australian dollar to remain well-supported, especially with economic data showing resilience in consumer spending.
However, the direction of the currency will be influenced by upcoming inflation readings and further developments regarding Chinese economic stimulus. Traders should also monitor comments from the RBA for any clues about future monetary policy shifts.
Official partners:
