AUD/USD has headed lower for a third straight day. In North American trade, AUD/USD is trading at 0.6892, down 0.34% on the day. On the release front, there are no Australian events. In the U.S., consumer spending numbers improved in May. Core retail sales climbed 0.5%, matching the estimate. Retail sales also improved to 0.5%, but fell shy of the forecast of 0.7%. Later in the day, the U.S. releases UoM Consumer Sentiment, which is expected to fall to 98.1, after an outstanding reading of 102.4 in the previous release.

The Australian dollar has had a dreadful week, falling 1.4%. The economy created an outstanding 42.3 thousand jobs in May, but this was not enough to prop up the currency. Investors preferred to focus on the unemployment rate, which remained at 5.2%, higher than the estimate of 5.1%. The currency is under pressure on Friday after soft Chinese manufacturing data. Industrial output was unexpectedly soft, dropping to its lowest level since 2002. The indicator gained 5.0% in May on an annualized basis, well off the forecast of 5.5%. The Aussie is sensitive to Chinese data, as the Asian giant is Australia’s largest trading partner.

As expected, U.S. retail sales data improved sharply in May, and these strong numbers could play a crucial role in the Federal Reserve’s forward guidance for rates. The markets are prepared for rate cuts in the second half of the year. The CME Group has set the odds of a July cut at 62% and another cut in September at 55%. Lower interest rates make the U.S. dollar less attractive to investors, which could be good news for equities.

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