Australian Dollar Dips on Soft Retail Sales; Eyes on Fed Rate Outlook

Australian Dollar Weakens After Retail Sales Miss; Market Awaits Fed Signals

The Australian Dollar (AUD) slipped on Wednesday against the US Dollar (USD) after disappointing domestic economic data, particularly May Retail Sales, added pressure to the local currency. However, broader market sentiment and Fed rate expectations may limit further AUD downside.

Weaker Retail Sales Weigh on AUD

The Australian Bureau of Statistics (ABS) reported that Retail Sales rose only 0.2% MoM in May, short of the 0.4% market forecast. The April figure was revised to 0% from -0.1%, suggesting sluggish consumer spending.

Additionally, Building Permits increased 3.2%, below expectations of 4.8%, though better than April's 4.1% decline. These figures reinforce concerns about weak domestic momentum, limiting Reserve Bank of Australia (RBA) policy flexibility.

USD Strength and Fed Rate Outlook in Focus

The US Dollar remains steady as traders await the release of the ADP Employment Change for June, a key precursor to Friday’s Nonfarm Payrolls (NFP). Fed Chair Jerome Powell has emphasized the need to observe more data before confirming a rate cut, but market sentiment leans toward a September easing, which could temper USD gains.

Trade Talks and Sentiment Offer AUD Support

The AUD/USD pair has seen occasional recoveries on the back of improving global risk sentiment, especially after reports from the Financial Times that US trade negotiators are pursuing phased deals ahead of the July 9 tariff deadline.

This development could reduce uncertainty and support commodity-linked currencies like the AUD, particularly if tensions ease with China — Australia’s largest trading partner.

Related Tredu Reads:

• Why Retail Sales Data Matters in Forex
• AUD/USD Forecast: Key Levels to Watch This Week
• How Fed Rate Cuts Influence Global Currencies