Australian dollar rises ahead of CPI

• Australian retail sales decline by 0.2%
• Australian CPI expected to fall to 5.2%

The Australian dollar has posted gains on Tuesday. In the North American session, AUD/USD is trading at 0.6630, up 0.35%.

Australia releases October inflation on Wednesday and is expected to fall from 5.6% to 5.2% y/y. The inflation rate remains much higher than the 2%-3% target and the September reading of 5.6% was the highest in five months.

Australian retail sales decline

Australia’s retail sales surprised on the downside with a 0.2% decline in October. This was short of the market consensus of 0.1% and a sharp reversal after the September reading of 0.9%. The decline was the first since June, with many consumers opting to wait until the Black Friday sales last week. As well, the Reserve Bank of Australia’s tightening cycle is filtering through the economy and weighing on households. The weak release did not faze investors as the Australian dollar is showing limited movement today. The growing popularity of Black Friday should translate into better retail numbers for the November retail sales release.

Last week, RBA Governor Michele Bullock said on Tuesday that inflation has peaked and that the upside risk to inflation was domestic and demand-driven. Bullock noted that inflation had dropped from 8.0% to 5.5% in less than a year, but it would take much longer for inflation to drop that amount again and fall to 3%. The RBA remains hawkish and raised rates earlier this month after holding rates for four straight times.

In the US, the Conference Board Consumer Confidence index came in at 102 in November, above the revised October reading of 99.1 and higher than the market consensus of 101.0. We’ll also hear from a host of Fed members during the day, which could provide some insights into the Fed’s plans for the December meeting.

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AUD/USD Technical

• AUD/USD is testing resistance at 0.6618. Above, there is resistance at 0.6650
• 0.6559 and 0.6526 are providing support

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