• AUD/USD is expected to continue its downside journey below 0.6640 amid the risk-off mood.
• Investors are worried that political dispute over raising US Treasury’s debt ceiling could fuel fears of a recession in the US.
• Monthly US Retail sales data is seen expanding by 0.7% vs. a contraction of 0.6%.

The AUD/USD pair is making efforts for keeping the auction above the immediate support of 0.6440 in the early Asian session. The Aussie asset is expected to continue its downside journey as investors believe that the Federal Reserve (Fed) will raise interest rates further despite softening of United States inflation.

S&P500 faced selling pressure on Friday as investors are worried that a political dispute over raising US Treasury’s debt ceiling could fuel fears of a recession in the US. The overall mood is quite risk-averse and investors are pouring funds into the US Dollar Index (DXY).

The USD Index recorded significant gains last week as investors believe that the US labor market is still solid and it will keep inflationary pressures steady ahead. Reuters reported 1.6 job openings for every unemployed person in March, well above the 1.0-1.2 range consistent with a market not generating too much inflation. However, rising weekly Initial Jobless Claims are depicting a different story. Weekly jobless claims for the week ending May 05 soared to 264K, significantly higher than the estimates of 245K.

Going forward, investors will keep an eye on Tuesday’s Retail Sales data (April). Monthly Retail sales data is seen expanding by 0.7% vs. a contraction of 0.6%. A recovery in retail demand would escalate fears of further interest rate hikes from the Fed.

On the Australian Dollar front, investors are awaiting the release of the Reserve Bank of Australia (RBA) minutes. Investors should note that RBA Governor Philip Lowe unexpectedly raised interest rates by 25 basis points (bps) to 3.85%. The RBA believed that the current monetary policy is not sufficiently restrictive to tame stubborn inflation.