Hawkish RBA Holds AUD, But Market Awaits Retail Sales
The Australian dollar fell slightly in the European session on Tuesday (February 10th) after briefly touching a three-year peak in the 0.7100 area. AUD/USD is currently trading around 0.7071, down -0.29% today—a sign that the market is taking a breather after yesterday's strong rally.
The triggers are varied: on the one hand, the US dollar briefly gained ground as traders began to tidy up their positions ahead of key US data (Retail Sales, then employment and inflation data). But on the other hand, the narrative of a slowing US labor market continues to hold the greenback back from further gains. The White House, through Kevin Hassett, even stated that job growth figures in the next few months could appear lower as labor force growth slows and productivity increases—making the market increasingly sensitive to data released this week.
What's keeping the AUD relatively strong (despite the correction) is the domestic story: the RBA has just begun tightening policy—raising interest rates 25 bps to 3.85%, the first such move in two years, and the market is still weighing the possibility of further tightening if inflation persists. This policy divergence provides the AUD with a cushion against the US dollar, whose direction is being debated over when the rate cut will begin.
The next focus is clear: tonight's US Retail Sales could trigger volatility, then the market will be fully focused on the delayed employment data (released Wednesday) and US inflation (Friday). In Australia, this week's CPI release will also determine whether the market becomes more willing to take the "RBA continues to be hawkish" position or not.
Source: Newsmaker.id
