The AUD/USD pair has edged higher towards the 0.6800 level despite flat Australian Retail Sales data for July. Investors are closely watching for upcoming US core PCE inflation data for July as well as the Caixin Manufacturing PMI for August. The RBA is unlikely to make any changes in policy normalization this year, despite the flat Retail Sales report in July.
The Australian Bureau of Statistics reported that there was no growth in Retail Sales for July, which was lower than economist forecasts. This flat growth can be attributed to the decreased spending power of households due to high inflation and the RBA’s restrictive monetary policy stance. However, the RBA is expected to keep its Official Cash Rate at the current level of 4.35% throughout the year, given the ongoing battle against inflation.
China’s Manufacturing PMI is expected to show a contraction for the second consecutive month in August, and this could impact the Australian Dollar negatively as it is often seen as a proxy for China’s economic prospects. Furthermore, investors are awaiting the US core PCE inflation data for July, with expectations of a rise from the previous month. This data will influence market speculation regarding potential Fed interest rate cuts in September.
The RBA plays a significant role in influencing the value of the Australian Dollar by setting interest rates that impact the economy as a whole. Factors such as inflation rate, growth rate, trade balance, and market sentiment also play a key role in determining the value of the AUD. Additionally, the health of the Chinese economy, Australia’s largest trading partner, and the price of Iron Ore, Australia’s biggest export, are crucial factors that influence the Australian Dollar.
Positive or negative surprises in Chinese growth data can directly impact the Australian Dollar due to the strong trade relationship between both countries. The price of Iron Ore, being Australia’s largest export, also plays a significant role in driving the value of the Australian Dollar. Moreover, the Trade Balance, which reflects the difference between exports and imports, is another factor that can influence the value of the Australian Dollar. A positive trade balance strengthens the AUD, while a negative balance has the opposite effect.
In conclusion, despite flat Australian Retail Sales data for July, the AUD/USD pair continues to trend higher, with investors closely monitoring upcoming economic data releases. The RBA’s unlikely pivot towards policy normalization this year, coupled with expectations of US core PCE inflation data and China’s Manufacturing PMI for August, will continue to drive market sentiment and impact the value of the Australian Dollar. The various factors outlined, including interest rates, trade balance, and the health of the Chinese economy, all play a significant role in determining the strength of the Australian Dollar in the forex market.
