The AUD/USD pair began the new week on a subdued note, consolidating just above the 0.6400 level during Monday’s Asian session. The pair remains range-bound within levels seen over the past month, as traders await fresh catalysts to drive the next directional move.
Chinese economic data released Monday showed mixed results. The National Bureau of Statistics (NBS) reported retail sales growth of 5.1% year-over-year (YoY) in April, missing the 5.5% forecast and slowing from 5.9% in March. Industrial production rose 6.1% YoY, surpassing expectations of 5.5% but slowing from a previous 7.7%. Fixed asset investment increased 4.0% year-to-date (YTD) YoY, slightly below the 4.2% forecast and unchanged from March’s reading. Market reaction was muted as attention centers on the Reserve Bank of Australia’s (RBA) policy decision scheduled for Tuesday.
The RBA is widely expected to cut interest rates by 25 basis points (bps), with the prospect of two additional cuts later this year amid easing inflation and growth concerns exacerbated by trade tensions. However, the recent de-escalation in US-China trade disputes has tempered expectations for aggressive monetary easing from the Australian central bank.
Looking ahead, the RBA’s policy guidance will be pivotal for the Australian Dollar and the AUD/USD pair’s next directional move. Meanwhile, a shift toward weaker global risk sentiment—evidenced by softness in equity markets—is capping the Aussie’s upside potential.
Further complicating the landscape, Moody’s recent downgrade of the US government’s credit rating has dampened investor appetite for riskier assets. At the same time, ongoing expectations for Federal Reserve rate cuts keep the US Dollar subdued. This dynamic may continue to provide tailwinds for AUD/USD but advises caution among bearish traders positioning for further declines.
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