• AUD/USD has shown no action despite the release of the weaker-than-anticipated Australian Retail Sales data.
• Aussie Retail Sales have further contracted by 0.6% due to higher interest rates by the RBA.
• The overall ground for the USD index seems not supportive as the FOMC has confirmed that it will be more data-dependent.

The AUD/USD pair has continued its sideways auction around 0.6770 despite the Australian Bureau of Statistics having reported downbeat Retail Sales data for the first quarter of CY2023. The economic data has landed at -0.6% than the estimates of 0.4% and the former contraction of 0.2%.

A weaker-than-anticipated Retail demand would provide support to the Reserve Bank of Australia (RBA) for keeping interest rates steady ahead. Investors should be aware of the fact that RBA Governor Philip Lowe announced an unexpected interest rate hike by 25 basis points (bps) last week, which pushed the Official Cash Rate (OCR) to 3.85%.

Going forward, more volatility is anticipated from the Australian Dollar ahead of Australia’s budget release. Despite a projection of $78bln the 2022-23 bottom line reached surplus as announced by Australian Treasurer Jim Chalmers. Bloomberg reported that Chalmers has been preparing the ground for the surprise return to surplus by noting significant improvement in revenue from higher commodity prices, and lower unemployment.

Meanwhile, S&P500 futures have trimmed some losses, portraying a quiet market mood ahead of the US debt ceiling negotiations and Consumer Price Index (CPI) data. The US Dollar Index (DXY) has faced barricades while attempting to climb above the immediate resistance of 101.50.

The overall ground for the USD index seems not supportive as Federal Open Market Committee (FOMC) has confirmed that it will be more data-dependent. “The Fed made a significant change in the forward guidance as the prior tone, “the Committee anticipates that some additional policy firming may be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive to return inflation to 2 percent over time” is replaced by “In determining the extent to which additional policy firming may be appropriate to return inflation to 2% over time.