Australian dollar falls despite solid retail sales

The Australian dollar is in negative territory on Tuesday. In the North American session, AUD/USD is trading at 0.6685, down 0.51%.

Australian retail sales surge

Australia’s retail sales sparkled in November but the strong rebound wasn’t reflected in the Australian dollar. Retail sales climbed 2.0% m/m in November, blowing past the estimate of 1.2% and recovering from a revised 0.4% decline in October. This was the highest reading since November 2021 as consumers came out and took advantage of Black Friday sales in late November. The boost in November sales could come at the expense of December sales, however, as consumers may have brought forward their Christmas shopping.

Consumer confidence has improved on expectations that interest rates have peaked. Last week’s ANZ consumer confidence index indicated that consumer confidence was at its highest level in a year and homeowners are also feeling optimistic as house prices have been rising.

Australia will release the November inflation report on Wednesday, with expectations that inflation fell to 4.4%, down from 4.9% in October. The markets have priced in the first RBA rate cut in June but that could be brought forward if inflation falls below the estimate. The US will release the December inflation report on Wednesday as well, which could mean a volatile day for the Australian dollar.

With the Federal Reserve on board for rate cuts this year, Fedspeak is being carefully monitored as investors search for hints as to the timing of a first rate cut. The markets have priced in an initial rate cut in March, but had to trim the odds after Friday’s nonfarm payroll report was stronger than expected. Atlanta Fed President Bostic said on Monday that he was comfortable with a restrictive stance while inflation continues to move down toward the 2% target.

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AUD/USD Technical

• AUD/USD tested resistance at 0.6732 earlier. Above, there is resistance at 0.6824
• There is support at 0.6625 and 0.6533

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