AUD/USD Recovers from 0.6900 as Australian Retail Sales Decline Less than Expected

As the Australian Bureau of Statistics reported a smaller-than-expected fall in Retail Sales for the fourth quarter of CY2022, the AUD/USD pair has attempted to recover to approximately 0.6900. The economic figures have decreased by 0.2%, when the market anticipated a 0.6% decline.

The Reserve Bank of Australia's (RBA) anticipated release of its interest rate decision on Tuesday will be the most significant event that will generate volatility in the Australian Dollar. As the Australian Consumer Price Index (CPI) has not yet reached its peak, the outlook for the policy stance is quite pessimistic. The rate of inflation in Australia reached a new high of 7.8 percent in the fourth quarter of CY2022.

Deutsche Bank Australia analysts believe that the RBA will likely hike the Official Cash Rate (OCR) to 4.1%, citing the most recent inflation update, which revealed a slightly higher-than-anticipated 7.8% increase in the CPI. According to Forbes Advisor, "while the RBA will likely move more slowly in 2023 than in 2022, we now estimate four additional 25 basis point increases this year: 25 basis points in February and March, and 25 basis points at the May and August meetings."

Following a significant surge in Nonfarm Payrolls (NFP) data in the United States, the risk profile is currently favoring safe-haven assets. The US Dollar Index (DXY) intends to raise its auction profile over 102.50. S&P500 futures maintained their downward trend during the Asian session, signaling a further decline in market participants' risk appetite. The yield on 10-year Treasury notes has risen to approximately 3.57 percent.